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Submitted: 5/11/2011
Master Thesis
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Abstract
Seminar Date: 05-11-2011 Level: Master Thesis in Information Technology Management, 15ECTS Institution: School of sustainable development of Society and Technology,
Malardalen University
Title: CRM system benefits, a case study of banking sector Supervisor: Dr Ole Liljefors Problem statement:
Customer relationship management (CRM) systems have been adopted to have better relationships with customers by having detailed knowledge of their requirements through using different information technologies. Implementing CRM systems correctly can provide many of benefits both for the customers and to the business as well. Banks have large numbers of customers and to fulfill their customer requirements most banks have adopted CRM systems. This thesis tries to identify how CRM systems are helpful in the banking sector to get the benefits.
Research Question:
management systems?
Method:
Research process used in this thesis is related to the realist approach. The study is structured by dividing the problem into different parts and then the relationship between them is analyzed. Both primary and secondary data collection have been used .The main method adopted to collect empirical data is open ended questionnaires. Secondary data have been collected by using the availability of Malardalen University online databases.
Conclusion:
Results showed that CRM system can provide a large benefit for a particular organization not only in attracting more and more customers but also in expanding business in related areas by the successfully implementing CRM. To reap the benefits more care is required at the implementation stage and also by the realization of the fact that not all the benefits can be achieved at once.
Keywords: CRM system, CRM successful implementation, CRM benefits, CRM customer
benefits, CRM business benefits.
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Acknowledgement
At first we would like to express gratitude to our thesis supervisor Dr. Ole liljefors for giving us his generous and kind support throughout writing this thesis. His ideas and comments during the seminars are really helpful for us to improve and complete our research. We are also grateful to him for his timely replying on different issues which were raised during writing this thesis. We are also thankful to Dr. Michael Le Duc who serves as a coordinator for IT Management program in Malardalen University. His ideas and way of teaching was very helpful in different courses which we studied in the degree program. We would also like to thanks Malardalen University for providing us useful resources like digital library which contains huge databases of academic material. Also thankful to our fellow students who gave their fruitful comments to us during seminars and help us completing our research. Mr. Ahmad Azad who is the head of CRM system in Karafarin Bank Iran helped us in getting the empirical data so we are also grateful to him for providing his support. At the last we are obliged to our parents and other family members back at home who really gave us their moral and financial support and helped us in completing our dissertation.
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ABSTRACT .............................................................................................................................................................. 2 ACKNOWLEDGEMENT ............................................................................................................................................ 3 CHAPTER1: INTRODUCTION ................................................................................................................................... 7 1.1 BACKGROUND..........................................................................................................................................................7 1.2 CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS: ......................................................................................................7 1.3 CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS IN BANKS ............................................................................................8 1.4 PROBLEM STATEMENT ...............................................................................................................................................9 1.5 RESEARCH QUESTION ................................................................................................................................................9 1.6 RESEARCH PURPOSE..................................................................................................................................................9 1.7 DELIMITATION: ........................................................................................................................................................9 CHAPTER2: RESEARCH DESIGN ............................................................................................................................. 10 2.1 METHODOLOGICAL STANCE: REALISTIC .......................................................................................................................10 2.2 RESEARCH APPROACH: DEDUCTIVE.............................................................................................................................11 2.3 RESEARCH METHOD: QUALITATIVE .............................................................................................................................11 2.4 DATA COLLECTION: .................................................................................................................................................11 2.4.1 Primary data: .............................................................................................................................................11 2.4.2 Secondary data: .........................................................................................................................................12 2.5 VALIDITY AND RELIABILITY OF THE RESEARCH: ...............................................................................................................12 2.6 METHOD CRITIQUE: ................................................................................................................................................13 CHAPTER 3: LITERATURE REVIEW......................................................................................................................... 14 3.1 CRM SYSTEM IMPLEMENTATION: ..............................................................................................................................14 3.1.1 IMPLEMENTING CUSTOMER FOCUSED BUSINESS STRATEGIES: .......................................................................................16 3.2 CUSTOMER RELATIONSHIP MANAGEMENT (CRM) SYSTEM BENEFITS: ................................................................................17 3.3 CUSTOMER BENEFITS ...............................................................................................................................................18 3.3.1 Customer satisfaction ................................................................................................................................18 3.3.2 Customer value ..........................................................................................................................................19 3.3.3 Customer Retention: ..................................................................................................................................19 3.3.4 Customer Achievement: .............................................................................................................................20 3.3.5 Customer trust: ..........................................................................................................................................20 3.4 BUSINESS BENEFITS .................................................................................................................................................20 3.4.1 CRM Application:........................................................................................................................................20 3.4.2 Infrastructure: ............................................................................................................................................21 3.4.3 Organizational Transformation: ................................................................................................................21 3.4.4 Customer support .......................................................................................................................................23 3.4.5 Customer segment .....................................................................................................................................23 CHAPTER 4:CONCEPTUAL FRAMEWORK .............................................................................................................. 24
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List of Tables: Table 1.. 8 Table 2. 12 Table 3.. 22 List of Figures: Figure 1..10 Figure 2..24
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List of Abbreviations: CRM: Customer Relationship Management CRMs: Customer Relationship Management systems IT: Information Technology
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Chapter1: Introduction
1.1 Background
The fast adoption and deployment of digital technologies has made major changes in market research. With the advancement in information technology mangers look to perform new ways of doing market research which, in turn, provides them knowledge of their current market in terms of opportunities and problems. Changes in the technology allow companies to rethink their plans so that they can get more information about their customers and their needs and requirements. (Gupta et al, 1999). According to Bauer et al (2002) collecting and processing information from the client and making an atmosphere of assurance and trust is important to retain customers. Organizing and maintaining long-term relationships have a significant impact on corporate success and this impact can be more strengthen by increasing the effectiveness of existing client relations Bauer et al, 2002). Rosenberg & Czepiel (1984) estimates that the cost of winning a new customer is five times higher than that of maintaining an existing customer (as cited in Chang, 2007). Further Reichheld & Sasser (1990) estimates that the retention of an additional 5% of customers, can increase profit by nearly 100% (cited in Chang, 2007) .So the importance of maintaining effective and long term relationship with customers is evident and demands a system which helps in maintaining such relationships.
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This chapter contains the introduction, research question, research purpose, problem statement and delimitation of the research In this chapter the method of conducting research is described. This section helps the reader to identify the research method, approach and stance the researcher employed to carry this research. The chapter consists of literature review. Literature review is conducted from different sources of databases available through university library. This section provides the summarization of the concepts. This Chapter contains the conceptual framework which is drawn from literature review. The framework provides a connection between concepts gathered and the purpose of thesis. This chapter contains information about the history of the case bank selected for this thesis. This section also contains
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Chapter 3
Literature Review
Chapter 4
Conceptual Framework
Chapter 5
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1.7 Delimitation:
This study is limited to only one bank as it is hard for the researcher to find the contacts in banks in and outside of Sweden. In thesis we concentrated more on benefits with successful implementation is consider important to achieve benefits. Study contains the benefit which the Karafarin bank got after their implementation of CRM system and it is not necessary that other banks or financial organizations got same benefits from CRM system. Research conducted in a single bank which can be considered as limitation of research.
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The primary data for this research have been collected by using a questionnaire. According to Fisher (2007) there are two types of questionnaires precoded and open. Precoded contain tick boxes to be fill in and open questions have free space so that respondent give response in their own words. The use of questionnaire in this thesis is divided to three parts and that is to gather response from the Karafarin bank in Iran on its implementation of CRM system and the
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Secondary data is the data which is collected from other researchers work. Secondary data is mostly obtained from journals, articles and books. In our research we use online databases available through (MDH University) digital library. Databases used in our research are given in the following table. Data bases used:
Database
Emerald Google Scholar Science Direct Elin @ Malardalen ABI/INFORM Global Scirus
Available through
http://ep.bib.mdh.se:2086/search.htm http://ep.bib.mdh.se:2147/ http://ep.bib.mdh.se:2080/ http://mdh.se/library/search/databasesindexpage/databasesaw/e/elineng http://ep.bib.mdh.se:3613/abiglobal/ http://www.scirus.com/ Table 2: Own illustration
Since our research question is quite clear and general, we found articles and journals by typing different keywords in above mentioned online databases. We select articles which closely relate to our research question and that is to identify the benefits of using CRM system. We consider successful implementation important to get these benefits so we also searched articles which provide information on CRM systems implementation. So different keywords which we use during our literature research are: 1. 2. 3. 4. 5. CRM system CRM successful implementation CRM benefits CRM business benefits CRM customer benefits
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3.4.2 Infrastructure:
Second target is the infrastructure .For having a powerful and efficient application an organization needs to provide strong and suitable infrastructure to share information. Organizations should cooperate in a synchronized way with their customers so by this concept they try to show that without this coordination, having the good customer relationship is very difficult and sometimes its impossible, and could not be efficient. So as a result CRM applications have to be able to hit into that in formations. To reaching to this goal managers needs a powerful data infrastructure, and also they should support hardware and software infrastructure that lead an organization to make a strong fast data recovery (Goodhue et al, 2002). According to Goodhue et al (2002) in this way the first step for each organization is to having an integrate system across all organization first they have to put in place a data resource that is integrated across various source systems and customer touch points; uses a single, unique identifier for every customer; and keeps the data accurate, timely, and reliable. Because IT departments are well aware of the benefits of such infrastructures, corporate IT often initiates such efforts and one problem that most organizations may face is that infrastructure investments are costly, and the returns are unlikely to be immediate. To convince top management, IT must sell them on the concrete business value of such infrastructure investments. (Goodhue et al, 2002) Implementing this approach that help organization to have successful CRM programs by focusing first on their infrastructure , then extending it, and capitalizing on it to deliver value may bring organization some important benefits like providing underpinning for other CRM activities. This may lead to identify key loyalty drivers too also Infrastructure efforts have much higher up-front costs, but they provide the possibility of coordination among all customer touch points (Goodhue et al, 2002).
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#1 The Three Targets Have Quite Different Organizational Costs and Benefits
Costs are relatively low. Greater efficiencies and effectiveness at the departmental level may result in greater local revenues and profits. Usually initiated at the department Level Multiple individual applications may lead to demands for coordination, better infrastructure. Needed data is limited in scope and volume. Integration problems are easier to solve because the data is controlled at the departmental level. Requirements are localized and easier to understand and predict.
#2 Sponsorship May Vary Across the Targets #3 Plan for the Evolution of Your CRM Efforts
Infrastructure creation is costly, requires a vision to justify. Departments give up control of their data. Possible cost savings from infrastructure consolidation. Possible quick hit returns From follow-on applications Often initiated by corporate IT, but must also enlist wider business sponsorship Once the infrastructure is in place, many individual applications become possible. Organizational transformation also becomes possible. Large amounts of data are needed from disparate source systems owned by different constituents, frequently without common identifiers. Difficult challenge. Need to support a multitude of users and applications. Harder to understand and predict requirements. Must be highly scalable.
An expensive, risky undertaking, but with the potential for great increases in revenues and profits.
Initiated by top management, but must enlist all levels of the organization. Usually involves new infrastructure and new applications to support new business practices. All the problems of the infrastructure target, with the added challenge of supporting new business processes with a changing data infrastructure. All the problems of the infrastructure target, with the added challenge of supporting new business processes with a changing technical infrastructure.
#4 Prepare to Get
#5 Ensure the
. Table 3: Source: Goodhue, Wixom, and Watson, 2002. Business Benefits through CRM Other researches bring these three points as a main business benefits.
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Conceptual Diagram:
Business Benefits
Implementation
Customer Benefits
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Farshid M, (2008) Master thesis in investing CRM activities in E- banking of Iranian banks, ISSN: 1653-0187, available in Google scholar Fitzgerald G,(1998) Evaluating information system projects, journal of information technology Vol 13, pp. 15-27. Foss B, Stone M, Ekinci Y, (2008) What makes for CRM system success or failure: database marketing and customer strategy management, Vol.15 No.2 Goodhue D.L, Wixom B.H, Watson H.J, (2002) Realizing business benefits through CRM: hitting the right target in the right way1, MIS Quarterly Executive Vol. 1 No. 2 Gupta,S, Burke,R.R, Rangaswamy,A ,(1999) Rethinking marketing research in the digital world, Pennsylvania state university, University Park, PA. Gupta M.P, Shukla S, (2002) Learnings from Customer Relationship Management (CRM) Implementation in a Bank, Global business review available through sage publications [Accessed 3rd April 2011]. Hendricks B.K, Singhal R.V, Stratman K.J, (2007) The impact of enterprise systems on corporate performance: A study of ERP, SCM, and CRM system implementations, Journal of Operations Management 25 available through Elsevier Ltd [Accessed 5th April, 2011]. Hoon P. C , Gul Y. K, (2003) Framework of dynamic CRM: linking marketing with information strategy, Business Process Management Journal, Vol. 9 No. 5, pp. 652-671
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Harej K, Horvat R.V, (2004) Customer Relationship Management Momentum for Business Improvement, Institute of Informatics, -Faculty of Electrical Engineering and Computer Science, University of Maribor. Injazz J. Chen and Karen Popovich, (2003) Understanding customer relationship management (CRM) People, process and technology, Business Process Management [e journal] 9(5) available through emerald database [Accessed 26 march 2011]. Ingold C, (2002) CRM systems allow agents to customize service, National Underwriter. Life & Health 106 (4) available through ABI/INFORM Global [Accessed 3rd April, 2011] Irani Z, (2002) Information systems evaluation: Navigating through the problem domain. Information and Management, 40(1), 1124. Iriana R, Buttle F, (2006) Strategic, Operational, and Analytical Customer Relationship Management: Attributes and Measures, Journal of Relationship Marketing, Vol. 5(4) Available online at http://jrm.haworthpress.com Jelnkova M, Lostakova H, Munzarova S, (2006) PROCESS OF COMPLEX CRM, VADYBA / MANAGEMENT. 2006 m. Nr. 1(10) Kale, S. H, (2004) 'CRM failure and the seven deadly sins', Marketing Management, Vol. 13 (September/October) Kotorov, R, (2002) Ubiquitous organization: organizational design for e-CRM, Business Process Management Journal, Vol. 8 No. 3, pp. 218-32. Kotorov R, (2003) Customer relationship management: strategic lessons and future directions, Business Process Management Journal [e journal] 9 (5) available through emerald [Accessed 7th April, 2011]. Kalakota, R. and Whinston, A.B, (1997) Electronic Commerce: A Managers Guide. Addison Wesley Longman, Inc. Lange K, (2003) Benefits of CRM, available through ABI/INFORM Global [Accessed 25 march 2011].
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Appendix A -Questionnaire
The questionnaire is divided into three parts for the convenience of the respondent. Purpose of study: You are requested to take part in this research as your contribution will help us to identify the benefits of using CRM system in the banking sector. We are researching on both the business and the customer side benefits and try to find out the outcomes of implementing CRM systems. Result of this Research: We are doing this research as a part of our master dissertation in IT Management and the result of this research is stored in the data base of Malardalen University which will be available on request. The research is being undertaken as part of a programme of academic study at Mlardalen University leading to the award of Masters Degree in IT Management. Personal Information:
Name: Ahmad Azad Designation: chief of CRM systems in karafarin bank Email: azad ahmad @gmail.com Organization name: karafarin bank
Organization type:
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Kindly specify the reason for that --------------------------------------------------------5) Do you keep each database separately or you have only one database? ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------6) What problems you faced while implementing CRM system?
7) How you manage employees effective commitment to change while implementing CRM system?
9) Before implementing CRM system how did you aware of the strategies of customers, channel and brand.
b) Also mention which of these strategies are most important a) Customer b) channel c) brand
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2) According to your view which of the below mentioned target is more important than other to get business benefit? a) CRM application b) organizational infrastructure c) organizational transformation b) Kindly state reason why it is important -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------3) How CRM system helps your organization to bring business profitability.
4) According to your view did CRM system brings operational efficiency and collaboration across your organization?
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