Customer Relationship Management Systems

Abstract: Customer Relationship Management (CRM) focuses on customer retention through development of sustainable relationships. Establishment of these relationships is based on customer satisfaction and an organisation’s ability to sustain high standards that identify them from competitors. CRM is also concerned with attracting new customers. In order to ensure customer satisfaction, there is need to understand customer requirements through studies which is essentially the function of CRM. Evolution of information technology has given rise to CRM systems which make this function even easier so that long-term profitability resulting from customer loyalty and cost cutting is realized. The use of these systems has proved invaluable so that higher education institutions are highly being encouraged to make use of them in order to enhance their ability to retain existing customers and attract new customers.

Executive summary

The use of Customer Relationship Management Systems is a strategy that has been received with high levels of enthusiasm in the business world. Many businesses have embraced the use of Customer Relationship Management Systems; simply known as CRM systems to enhance satisfaction of existing customers and to attract new customers. This has been referred to as a shift from transaction-specific to cumulative customer oriented satisfaction through incorporating information technology in CRM. CRM systems are attributed to the growing concept of customer-centrism which focuses more on customer satisfaction to increase profitability. Institutions of higher learning have not been left behind and several of them have already turned to the use of these systems.

The high level of competitiveness in institutions of higher learning as more investments are made in the sector has prompted them to adopt more proactive approaches to customer attraction and retention. Constant changes in customer expectations and demands have also played a big role in the adoption of these systems in order to help in meeting these needs. It is however notable that many institutions are still stuck with the traditional manual system of customer care. This is mostly due to the unavailability of funds or ignorance of the benefits that they are likely to obtain from CRM systems. This paper aims at filling this knowledge gap so that institutions of higher learning may realize how much they stand to gain from investing in CRM systems. It clearly demonstrates how they can use these systems to retain existing customers and recruit new ones.

A study conducted in various universities and colleges revealed that customers would appreciate the use of CRM systems which would ensure that their queries are solved efficiently. The fact that CRM could help in saving time made it even more important to the customers. The study which incorporated high school seniors, university and college students, parents, staff and alumni in a study sample made note of the importance that customers placed on efficiency citing that long procedures are tiring and demoralising. Most respondents were quick to note that websites eliminate a great deal of unnecessary inquiries since most of the information required about the institution was likely to be available from the website. This way they did not have to contact the administration when they had questions.

This study reveals that the use of CRM could actually save institutions from the unnecessary expenses resulting from customer dissatisfaction. This is done through the identification of customer needs which are then assimilated into the institutions’ strategy to meet these needs. This way, complaints are eliminated which saves the institution from loss of customers and loss of money. Stefanou and Sarmaniotis (2003: 623) note that dissatisfaction of customers is not only costly to the institution but to the customer as well. When a customer loses in a deal, the probability that he or she will utilize an organisation’s services again is greatly reduced.

CRM systems could help institutions of higher learning to cut on their costs significantly thereby improving their profitability. In the study, the question of costs is raised and it is considered one of the limiting factors towards the acquisition of CRM systems. On the same note however, the study establishes that the cost involved in the acquisition is worth considering the benefits that the institution is likely to obtain in the long-run once the system is in place. In concluding the study, the need for caution during the selection of CRM systems to be used in the institutions is also emphasised.

Chapter 1

Introduction/Background

1.10 Statement of the problem

Institutions of higher learning are often overwhelmed by the high numbers of customers that they have to handle. Consequently, they end up not satisfying every customer’s need and instead opt for ways to collectively address customer needs. This however could be detrimental to the institutions because needs vary from one customer to the other. Further, there is a risk of losing customers as a result of the high number of colleges and universities that have emerged thereby raising the level of competition. In public institutions, it is common for customers who are mainly students being taken for granted. The administration is likely to be tempted to assume that it is the students who require education and hence demand their services and not vise versa. Conant (2003: 3) however notes that this kind of ignorance could culminate into deleterious effects on the institution’s performance and even loss of customers. This according to Cleary (2001: 33) would be quite unfortunate because even the best institution is ineffective when its customer focus is lost. Every student, parent, alumni and any other type of customer that the institutions serve is of great importance and deserves to be treated right. For this reason, understanding their needs and integrating this with the company strategy to better satisfy them is quite inevitable. Whenever such kind of a proposition is put forward, several questions are bound to arise: What options do institutions of higher learning have in ensuring that their customers’ needs are properly taken care of? Can any given institution cope with the ever changing customer needs in order to satisfy them? What about the ever rising levels of competition? Which is the right criterion to address these issues? Is it possible to gain positive results from their implementation? How much will it cost the institution? These are some of the problems and queries that this paper seeks to demystify.

Many options are available when a company needs to meet its customers’ needs. A customer care strategy that caters for the present as well as the future needs of customers is what any modern organisation requires in order to survive the rising levels of competition. The most recent strategy and whose popularity is growing at a high rate among organizations not necessarily in the education sector is the use of customer relationship management systems. As put forth by various studies, customer relationship management systems will undoubtedly help in the provision of better services, management of existing customers and recruitment of new ones in higher education institutions. A proper understanding is however necessary if these institutions are to use CRM systems as their customer care strategy. This study is therefore justifiable and its findings will come in handy in ensuring that higher education institutions can manage their customers better.

1.20 Justification of the study

Increase in competition among institutions of higher learning has been on the rise hence the need for strategies aimed at retaining current customers and attracting new ones. Just like in any other business entity, institutions must aim at satisfying their customers. This way, they are assured of increased profitability. This study will form a discussion on customer relationship management which is in essence a sophisticated way of ensuring customer satisfaction through establishment of sustainable customer relationships. This study could therefore be of great importance to institutions of higher learning which have not yet embraced the use of CRM systems into their programs.

There is a general agreement that technology is advancing at a high rate and that customers are now turning towards information contained on the internet to make their purchasing decisions (Bull, 2003: 593-594). This new trend calls for a change in strategies used by companies to attract and retain new customers. By the use of the internet, customers can now get information about products and services, their prices and unique characteristics which they can then compare to others available over the internet. Making such information available over the internet is therefore very vital in today’s business world. This applies perfectly to prospective students and staff who are likely to make use of the internet information to make important decisions about their school of choice. By making use of CRM systems, institutions are able to attract new customers and their customer base can be improved. A study focusing on the importance of CRM systems which are basically computer-based strategies is therefore justifiable as it will help institutions to better understanding of its working and importance.

1.30. Objectives of the study

To make this study plausible in addressing the research issues and concerns, several objectives were set to guide the study. The major objective was to determine characteristics of customer relationship management systems that make them useful to higher education institutions and why institutions should adopt them to improve their competitiveness. Other objectives included:

1. To find out whether costs of CRM systems impact on organisation ability to attain the systems.

1. To establish whether there are any risks involved in the use of CRM systems.

1.40. Research questions

1. What constitutes of customer satisfaction according to customer satisfaction theories?

1. Does ensuring customer satisfaction contribute to the business effectiveness, productivity and profitability?

1. What is meant by Customer Relationship Management Systems? Is there a relationship between Customer Relationship Management and customer satisfaction?

1. Are they useful in higher education institutions? If so, how can they benefit from adopting Customer Relationship Management Systems?

1.50. Methodology outline

This study makes the use of reliable sources of information through conducting interviews and using secondary data from previous studies conducted by various scholars in the same field. By making use of an example of Imperial College, this study will show that adopting the use of CRM systems could lead to a tremendous transformation in an institution’s service delivery.

Chapter 2

Literature Review

2.1. The customer satisfaction theory

2.1.1. Customer satisfaction

Customer satisfaction forms the core in the attraction and retention of customers into a business. It is for this reason that customer satisfaction is often considered very vital for business survival. Customer satisfaction is used to refer to contentment, happiness or well-being of an organisation’s customers (Anderson, 1973: 38). It is all about doing what is desirable to a customer. In the classical definition however, the degree of correspondence between a customer’s expectations and what is actually provided in the perceived product or service is what constitutes customer satisfaction (Stefanou and Sarmaniotis, 2006: 619). Should the service or product exceed expectations or just fulfil it, customer satisfaction is deemed to have occurred. The level of at which the product meets the customer’s needs then determines whether the customer is satisfied, moderately satisfied, highly satisfied and so on. Depending on the customer’s attitude, this could work well towards improving the business’ customer loyalty. If a product or service is below the customer’s expectations, dissatisfaction occurs and the probability of losing the customer to competitors increases (Anderson, 1973: 38-39).

In measuring customer satisfaction, a comparison between the expected and the perceived quality are objectively compared. The expected quality is what the customer expects from the company and which should be provided by the company. It is what represent the customer’s wishes, expectations and needs and is referred to as the ‘Should’ factor (Wilson 1991: 152). On the other hand, what the business actually gives the customer is what is referred to as the perceived quality. Perceived quality is known as the ‘is’ factor (Wilson, 1991: 152).

The basic factors are those referred to as ‘must have’ aspects or dissatisfiers. Basic factors do not afford the customer any satisfaction and they are deemed to be obvious. In other words, the characteristic is in essence what the customer wants and if this is not there then he would not even buy the product or service in the first place (Croteau, 2003: 25-26). For example, any customer will expect that an institution of higher learning provides education as a prerequisite and is bound to take this for granted. This characteristic does not trigger any sort of excitement from the customer as it is considered normal (Kano, Seraku and Tkahashi, 1984: 40). It is other factors that drive the excitement towards making a particular choice. This leads us to the excitement factors which are also known as satisfiers. These factors are the attractive characteristics of a good or service meant to generate delight in the customer (Croteau, 2003: 26). They are also considered as the factors that distinguish an organisation from its competitors. It is these same features and characteristics that an organisation should emphasise on when advertising their goods to prospective customers so that they choose them over their competitors. Finally, the performance factors serve the purpose of providing the explicit needs of the customer (Conant, 2003: 7). When the performance is high or when the customer’s needs are completely met, the result is customer satisfaction. If there is low level of performance however, customer dissatisfaction results and this could cause detrimental effects on the company through loss of customers.

2.1.2. Significance of customer satisfaction

Numerous empirical findings are of the view that customer satisfaction forms the basis of establishing competitive advantage. It is through customer satisfaction that the business can be assured of a bright future through repeat sales (Kano, Seraku, Takahashi and Tsuji, 1984: 39-41). Customer satisfaction helps to gain loyalty and hence retain current customers besides attracting new customers to a company. Unsatisfied customers are likely to leave because as Wilson (1991: 156) notes, only four out of every one hundred customers come back to complain. Instead, they go on and switch companies opting to keep the discontentment to themselves. This is to mean that satisfaction is extremely vital for the survival of any business and should therefore be highly regarded. Stefanou and Sarmaniotis, 2003: 619) contend with the fact that retaining the existing customers is much easier than attracting new ones hence the need to build strong customer relationships through striving to satisfy their needs and meeting their expectations. Consumer satisfaction is therefore vital for any organisation’s success and should be taken seriously. With this kind of knowledge, business strategies are now being inclined towards customer satisfaction. To do this, Customer Relationship Management has been embraced by many businesses (Grant and Anderson, 2002: 36; Conant, 2003: 21; Light, 2003: 607; Kirker, 1994: 12).

Recommendations made by customers are said to attract almost the same number of customers that the business attracts on its own. This happens through recommendations. Wilson (1991: 103) notes that every satisfied customer is bound to say something positive about the product to her friends and relatives. These individuals could eventually end up being loyal customers to the business thus increasing customer base. Dissatisfied customers will complain and talk ill of the product or service such that prospective customers are discouraged and may never take the company’s product following negative remarks from those that had used it before (Wilson, 1991: 157).

2.2. Understanding Customer Relationship Management

The survival of any business is to a large extent determined by the level of customer satisfaction. This understanding has seen the rise in the customer-centrism strategy as a means to retain and attract new customers (Patterson, 2007: 5-6). The rise in globalization has led to high levels of competition so that every business must work towards addressing customer needs to keep them from turning to competitors. According to Oliver (1996: 88) customers are likely to move to competitors if they feel that they are not obtaining what they want. Loss of customers could be detrimental since a business cannot exist without customers. In this kind of competition for customers, the notion of Customer Relationship Management (CRM) has gained an important role in business management. Light (2003: 603-604) refers to CRM simply as the management of company-customer relationships while Stefanou and Sarmaniotis (2003: 617) call it relationship marketing. Seeman and O’Hara (2006: 25) add that CRM aims at increasing customer satisfaction by customizing the service provided to each consumer. Further, Seeman and O’Hara refer to CRM as the process by which business information and consumer information are brought together through a centralized system.

Major components of CRM include communication management, marketing, recruitment, customer support and service among others. It is a strategy that places the customer as the major focus in the organisation. Stefanou and Sarmaniotis (2003: 613-617) refers this as a customer-centric strategy where understanding the customer life cycle is essential. There is also need to understand the ever changing customer needs triggered by changes in lifestyles and income changes. CRM has often been described as a shift from the transaction-specific to cumulative customer satisfaction through relational orientation (Raab, 2008: 132). In order to satisfy this prerequisite, CRM has been divided into two major procedures; the operational function and the analytical function. While the operational function involves the collection of data from customers, the analytical function is concerned with analysis of data in order to understand the customer needs so that they can be effectively addressed (Peelen, 2005: 63). Data can be collected through the use of interviews and questionnaires, customer feedback, complaints and physical reactions among others. Using this kind of information, the customer service department can easily determine whether customers are satisfied with their products or not (Kirker, 1994: 14). If they are not satisfied, strategies aimed at addressing the various needs must be formulated. With the increasing level of globalisation, technological advances are being strongly felt in the business world. Further, customer relationships have become more complex due to consumer mobility and the rise of suburbs (Milliron, 2001: 52). Customer tastes and preferences are changing by the day as people embrace the modern world. In response to this, more companies have taken up technology-led techniques to further enhance their performance. It is for this reason that the CRM systems have emerged and companies are now turning from the manual CRM to computerised CRM.

2.3. Customer relationship management systems

The use of Customer Relationship Management in institutions of higher learning is a relatively new genre of technology operations whose popularity is growing at a high rate (Light, 2003: 605). The application which is computer-based has aided in making sure that the relationship between customers and businesses can be effectively managed (Peelan, 2005: 79). Information Technology advances have been a catalyst in customer relationship management systems. Traditional analysis of data is slowly becoming outdated and the use of software to perform such duties is being adopted by the day. CRM systems have gained widespread popularity especially with the so called “forward thinking managers”(Croteau, 2003, 29). These systems not only analyze customer needs effectively but also make work easier for managers thus saving the time required for data analysis. Bradshaw and Brash (2001: 522) define CRM systems as a combination of discrete software tools which serve the purpose of enhancing customer satisfaction, reducing costs, identifying new opportunities, increasing revenue and attraction new customers among others. They note that organisations have no reason to fear initial costs of acquiring these systems because the benefits to be gained in the long-run exceed the costs incurred in the acquisition. Research shows that sophisticated technology has brought about the emergence of more advanced CRM systems (Milliron, 2001: 51). Further, it is notable that organisations that are currently using these sophisticated CRM technologies are gaining competitive advantage over their competitors who make use of basic data collection approaches (Abbott, Stone and Buttle, 2001: 27). Information Technology has aided companies to effectively customise their customer care procedures so as to ensure that they are well served.

Following the emergence of CRM which aims at individualising customer needs, companies are now demanding technologies which make it easier to keep records about individual customers. This eliminates high numbers of record which have to be retrieved every time a customer visits the business (Bull, 2003: 31).Using the various CRM systems available in the market, it is possible for companies to collect all available data about a certain customer which is then saved in the company database. Whenever an enquiry is made by this customer, the customer care representative just needs to feed the necessary details in the database to retrieve everything about the consumer (Grant and Anderson, 2002: 26). This way, it is becomes easier to address these customers’ needs depending on the situation at hand.

The use of web technology is one of the most prevalent applications of CRM technology (Milliron, 2001: 52). Savvy managers have realised the high rate at which the world is suddenly becoming computerized. The ease of internet navigation and development of broadband services has turned customers into active internet users. To maximise on this, internet marketing has emerged with more companies now displaying their goods in popular web pages such as networking sites (Kotler and Fox, 1995:96). It is not only the goods that they advertise on the internet however, websites containing company information have been developed so that customers can easily access any information they desire from the website (Light, 2003: 605). Most websites often have customer inquiry sections where questions can be asked and complaints deposited (Light, 2003: 606). The use of chat rooms to answer customer questions directly from the help care desk is also used in certain sophisticated websites. While websites are likely to serve customers who are already familiar with the company, new ways of directing prospective customers have been established. In popular web pages for example, clicking on a certain advertised good or service takes the prospective customer to the company’s website where he or she can now access more information on about the company and other goods and services offered by the company. This is to mean that while company websites were previously used by companies to showcase their activities and other information about the company, they are now doubling up as marketing tools to retain existing employees and obtain new ones (Light, 2003: 606).

2.4. Customer relations in institutions of higher education

Starting the mid-80s and into the late 90s, many higher education institutions engaged themselves in restructuring and engineering their administrative operations so that costs were reduced and consequently better services could be provided (Grant and Anderson, 2002: 24). The focus is slowly shifting from these operational changes meant to improve service delivery to identification of customer needs. These needs are then being used to identify the areas that need to be improved in order to effectively satisfy customers. This has been described as a proactive action because institutions can learn what their customers want then work towards satisfying these needs before they lose them to other institutions which meet such needs (Bull, 2003: 593). Customer relationship management (CRM) is fast gaining popularity as more institutions realize that maintaining healthy relationships with customers is vital for business success. Organisations that make use of customer relationship management report increased sales resulting from the good relationships established with their customers (Croteau, 2003: 29). Customer relations management (CRM) enables the analysis of past customer behaviour in a bid to anticipate future trends and hence do everything in their capacity to ensure that customer needs are met. While many institutions have embraced CRM, few have ventured into the use of customer relationship management technologies (Conant, 2003: 3-5). For some, it is because of inadequate information about customer relationship management (CRM) systems while for others is because of fear of initial costs associated with installing such systems.

Seeman and O’Hara (2006: 26) note that at least 75 percent of the students entering higher education institutions have a substantial exposure to technology. The new generation of students are described as technology savvy students due to their undeniable contact with technology. As a result, their expectations about technology resources available in the institutions are very high (Milliron, 2001: 16). From what they have learnt over the internet and other technology literature, technology has been used to make procedures easier for customers unlike when manual systems were used. In their minds, institutions of higher learning should fall under this group that has acquired these systems in order to serve them better. Their absence therefore could frustrate their expectations which could culminate to serious consequences (Croteau, 2003, 31). For existing students, they could change schools and discourage their counterparts from joining the school. The use of CRM also serves the purpose of unifying the university or college administration such that the needs of customers can be catered for without having to move from one office to another.

Many businesses today have now introduced websites through which they serve their customer’s needs. In the same trend, colleges and universities should take on this innovative method of communication to reach out to their customers without necessarily requiring them to visit the institution physically (Kotler and Fox, 1995: 96). This reduces physical and geographical barriers through providing all the information that current and potential customers would like to know about the institution. In designing a website, the technician involved must collect all the information that the institution wishes to put on the site (Milliron, 2001: 17). This information is then arranged in such a way that given links can lead the customer to the desired departments so as to access the required information.

Chapter 3

Methodology

Introduction

This section of the paper quantifies the ability of the study to effectively satisfy the set objectives. Besides giving the procedures, methods and samples used in the study, it also outlines major limitations faced during the study.

3.1. Research scope

The essence of this study is to establish whether Customer Relationship Management Systems could be of help to higher education institutions. As such, the study delimits itself to the role of customer relationships in institutions of higher learning. The importance of Customer Relationship Management systems forms the basis for this study and hence the advantages of this strategy form a core subject of the study. Due to the large geographical coverage of institutions and financial constraints, only schools in Madrid and Canterbia in Spain were used for the study.

3.2. Data and data collection

Collection of data forms influences the outcome of the study to a large extent. For this reason, the data collection procedure was applied in the best way possible to enhance efficiency and to give the most accurate results. Both primary and secondary data were applied in the study.

a) Primary data

Factual information from the respondents was vital in making effective conclusions. To obtain this information, two separate types of questionnaires were set. These focused on current customers and potential customers. For simplicity, senior high school students who are most likely going to join universities and colleges after graduating were interviewed to determine the qualities they considered important in a college. Further, they were required to suggest the various components they would like incorporated in the college and university CRM systems. Current customers included students at colleges, staff, parents and alumni. The questionnaire directed at this group was aimed at finding out the application of CRM in their schools and how they thought it could be better improved to by incorporating technology. For those whose schools had already adopted CRM systems, they were asked to give the advantages they had witnessed and the difference with what they heard from colleagues in other schools not using CRM systems. Questionnaire were read out and filled by the researcher as the respondent gave their views.

b) Secondary data

Equally important was the use of secondary data which gave the study a theoretical background. Without the use of books, journals and periodicals among other written works, there was no way of justifying the concept of Customer Relationship Management Systems. The literature review in particular was solely dependent on previously published works. As such, secondary data was highly employed in the study.

3.3. Sample selection, technique, and size

The study sample consisted of ten college students, ten university students, twenty high school seniors, twenty staff members and a random selection of twenty parents and alumni of various colleges and universities. Due to the large population of probable respondents, a method for selecting a sample had to be identified. The strategic sampling method was used to identify respondents for the study.

3.4. Ethics of the research methodology

Before the beginning of the study, an objective of reducing respondents’ compromise as far as possible was set. The views contained in the questionnaires were for research purposes only and no third party was allowed to come into contact with them. With such an assurance, respondents felt free to give out information considered sensitive. For privacy purposes, no respondent was required to give out his or her name during the interviews. This raised confidentiality as required in scholarly research.

3.5. Limitations of the study

As mu