attributes and measurement

GROUP 2 PRESENTATION

STRATEGIC, OPERATIONAL AND ANALYTICAL CUSTOMER RELATIONSHIP MANAGEMENT:

ATTRIBUTES AND MEASURES

Author: Reiny Iriana Macquarie Graduate School of Management

WHAT IS CRM

LITERATURE REVIEW

METHODOLOGY

CONCLUSION

Huynh Thanh Phong M987Z242Le Thi Ngoc Mai M987Z243 Nguyen Thuy Hang M987Z236 Bui Thi Thuy M987Z204 Pham Thi Nguyet M987Z241

WHAT IS CRM?

WHAT IS CRM?

LITERATURE REVIEW

METHODOLOGY

CONCLUSION

CRM is a business strategy combined with technology to effectively manage the complete customer life-cycle (Smith 2001)

CRM is the establishment, development, maintenance and optimization of long-term mutually valuable relationships between customers and organizations (CRM (UK) 2001)

A CRM system is comprised of 2 major components: a set of functions that allows the organization to build an understanding of customer behavior, and a second set of functions that allow us to communicate with customers, across many channels, to meet their service requirements, and to try to persuade them to behave more profitably (Forsyth 2001)

CRM is an e-commerce application (Khanna 2001)

CRM aligns business processes with customer strategies to build customer loyalty and increase profits over time (Rigby 2002)

BUT……“There is no one correct

definition of CRM. Moreover, the definition of CRM will

evolve and change over time” (Goldenberg 2000)

WHAT IS CRM?

LITERATURE REVIEW

METHODOLOGY

CONCLUSION

WHAT IS CRM?

Payne(2001) developed a strategic framework for CRM, consisting of five interrelated cross-functional processes: 1. Strategic Development Process 2.Value Creation Process 3. Multi Channel Integration Process 4. Information Management Process 5. Performance Assessment ProcessFour of these 5 processes are subsumed within three forms of CRM 1. Strategic CRM 2. Operational CRM 3. Analytical CRM

WHAT IS CRM?

LITERATURE REVIEW

METHODOLOGY

CONCLUSION

WHAT IS CRM?

LITERATURE REVIEW

METHODOLOGY

CONCLUSION

1. Strategic CRM

Operational CRM

WHAT IS CRM

Analytical CRM

METHODOLOGY

CONCLUSION

LITERATURE REVIEW

Strategic CRM

1. Strategic CRM

- In Payne’s (2001) view, the strategy development and value creation processes jointly represent Strategic CRM

- A top down perspective on CRM, which views CRM as a core customer centric business strategy that aims at winning and keeping profitable customers (Buttle ,2004)

- The goal is to align the broader business strategy with the customer strategy

Operational CRM

WHAT IS CRM

Analytical CRM

METHODOLOGY

CONCLUSION

LITERATURE REVIEW

Strategic CRM

1. Strategic CRM

- In the value creation process, business and customer strategy decisions are translated into implementation programs that generate value for customers and company alike.

- The value the customer receives is delivered by the company’s value proposition(s)

- The value the organization receives is the company’s return on investment from its customer management strategy.

Operational CRM

WHAT IS CRM

Analytical CRM

METHODOLOGY

CONCLUSION

LITERATURE REVIEW

Strategic CRM

2. Operational CRM

- Is a perspective on CRM which focuses on major automation projects” (Buttle, 2004).

- Focus on the automation of selling, marketing, and service functions but not limited at back office functions such as human resources and finance

- Is to improve the efficiency and effectiveness of customer management processes

Operational CRM

WHAT IS CRM

Analytical CRM

METHODOLOGY

CONCLUSION

LITERATURE REVIEW

Strategic CRM

2. Operational CRM

Operational CRM

WHAT IS CRM

Analytical CRM

METHODOLOGY

CONCLUSION

LITERATURE REVIEW

Strategic CRM

3. Analytical CRM

- Is a bottom up perspective, which focuses on the intelligent mining of customer data for strategic or tactical purposes” (Buttle, 2004).

- Uses technology to accumulate and analyze customer-related data, and to give direction to the strategies and tactics that are implemented in the channels and touch-points deploying Operational CRM

- Standard technology applications within Analytical CRM are data warehousing and data mining solutions (Gebert, Geib, Kolbe, & Brenner, 2003).

Operational CRM

WHAT IS CRM

Analytical CRM

METHODOLOGY

CONCLUSION

LITERATURE REVIEW

Strategic CRM

3. Analytical CRM

- Doyle (2002) suggests that Analytical CRM applications enable companies to perform 6 major functions: + Analysis of the characteristics and behavior of

customers + Modeling to predict the behavior of customers + Communication management with customers + Personalized communication with customers + Interaction management + Optimization to determine the best

combination of customers, products and communication channel

Operational CRM

WHAT IS CRM

Analytical CRM

METHODOLOGY

CONCLUSION

LITERATURE REVIEW

Strategic CRM

3. Analytical CRM

- Analytical CRM can increases an organization’s revenue in a number of ways (SAS 2003):

+ Effective cross sell and up sell+ Prediction of which customers are most likely to buy+ Identification of high value customers+ Increased brand awareness+ Increased customer satisfaction, loyalty and referrals

Operational CRM

WHAT IS CRM

Analytical CRM

METHODOLOGY

CONCLUSION

LITERATURE REVIEW

Strategic CRM

METHODOLOGY

The objective of the research was to develop a clearer conceptualization of CRM, and, if feasible, to create a scale that could be used to evaluate a company’s orientation towards one or more of these three forms of CRM

The approach to creation of the scale was based on the recommendations of Churchill (1979) for the development of better marketing constructs.

3 Phases included:- Phase 1: Generation of Scale Items - Phase 2: Scale Refinement: Exploratory Factor Analysis and Item-Total Correlations - Phase 3: Scale Refinement: Confirmatory Factor Analysis

WHAT IS CRM

METHODOLOGY

METHODOLOGY

LITERATURE REVIEW

1. Phase 1: Generation of Scale Items

- Based on the literature review of a set of attributes that had been used to describe and discriminate between different three forms of CRM to generate a pool of 32 items for the research.

+ A set of questions on Strategic CRM+ A set of questions on Operational CRM+ A set of questions on Analytical CRM

WHAT IS CRM

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Phase 2: EFA + ITC

Phase 3: CFA

Phase 1: Scale Items


WHAT IS CRM

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Phase 2: EFA + ITC

Phase 3: CFA


Items Strategic CRM

S7 An important objective of our CRM program is to enhance the lifetime value of our customers

S14 improve our understanding of customer needs, expectations and preferences

S19 lift customer satisfaction and retention levels

S20 CRM provides the basis of our competitive advantage

S21 Our CRM strategy aims to win and keep carefully chosen customers or customer segments

S22. Our CRM strategy creates mutual benefits for both customers and company

S26 Our company is using CRM to create a customer-focused business culture

S28 Our company is using CRM to ensure that all our people understand which customers we want to serve

S29. Our company is using CRM to help us be more customer focused than our competitors

S30. Our company is using CRM to find better ways of offering customers more value


WHAT IS CRM

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Phase 2: EFA + ITC

Phase 3: CFA


Items Operational CRM

O4An important objective of our CRM program is to enable us to adapt our offer to suit different customers’ requirements

O6Enable us to select the most appropriate communication channels for interactions with customers

O9 help our marketing people run more effective and efficient campaigns

O10 help our sales people to have more effective and efficient interactions with customers

O11improve collaboration with our customers and channel partners

O15 improve the productivity of our sales people

O16 reduce the cost of our customer-facing operations

O18deliver consistent customer experience across all customer touch points and channels

O23Our company uses CRM to automate customer service processes to make them more efficient and effective

O24automate marketing processes to make them more efficient and effective

O25automate selling processes to make them more efficient and effective


WHAT IS CRM

METHODOLOGY

CONCLUSION

LITERATURE REVIEW

Phase 2: EFA + ITC

Phase 3: CFA


Items Analytical CRM

A1An important objective of our CRM program is to create a comprehensive customer-related database

A2deliver customer data to our people at the right time so that they can cross-sell and up-sell customers

A3 deliver customer data to our front line staff so that they can sell, market and service our customers more effectively

A5 enable us to conduct intelligent analyses of customer data to guide our marketing and sales efforts

A8ensure that analysis of customer-related data underpins all our customer interactions

A12 improve our ability to conduct real time analysis of data when interacting with customers

A13 improve our forecasting capabilities

A17the use of analytical tools to make sense of, and profit from, customer data

A27Our company is using CRM to enable us to obtain competitive advantage from customer data

A31 Our company uses CRM help us identify high value customers

A32uses customer information to construct customer profiles which are used to improve the consistency of the customer’s experience

2. Phase 2: Scale Refinement: Explanatory Factor Analysis and Item – Total Correlations

- The initial stage of scale reduction was performed using 2 statistical processes:

+ Exploratory factor analysis+ Item-total correlations

- All 32 items were factor analyzed, using principal component analysis with varimax rotation.

- This generated a 7- factor solution, with each factor having an eigenvalue over 1. The 7 factors solution accounted for 77.85% of the variance.

WHAT IS CRM

METHODOLOGY

CONCLUSION

LITERATURE REVIEW

Phase 2: EFA + ITC

Phase 3: CFA



WHAT IS CRM

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CONCLUSION

LITERATURE REVIEW

Phase 2: EFA + ITC

Phase 3: CFA



- The items with loadings of 0.4 or greater than one of the factor were eliminated.

- 18 items remained: 3 items for Strategic CRM, 6 Items for Operational CRM and 9 items for Analytical CRM.

- The resulting 3 factor solution accounted for 66.04% of the variance.

WHAT IS CRM

METHODOLOGY

CONCLUSION

LITERATURE REVIEW

Phase 2: EFA + ITC

Phase 3: CFA



WHAT IS CRM

METHODOLOGY

CONCLUSION

LITERATURE REVIEW

Phase 2: EFA + ITC

Phase 3: CFA



- At the end of Phase 2: Scale refinement, 14 items remained, clustered and named as follows:

WHAT IS CRM

METHODOLOGY

CONCLUSION

LITERATURE REVIEW

Phase 2: EFA + ITC

Phase 3: CFA



Factor 1: Customer Orientation 5 items in total, made up of 3 items from the Strategic CRM inventory (S19, S21 & S28), and 2 items with the highest corrected item-total correlations, both from the Analytical CRM inventory (A31 & A32).

WHAT IS CRM

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LITERATURE REVIEW

Phase 2: EFA + ITC

Phase 3: CFA

Phase 1: Scale Items Items Customer Orientation Factor

S19 lift customer satisfaction and retention levels

S21 Our CRM strategy aims to win and keep carefully chosen customers or customer segments

S28 Our company is using CRM to ensure that all our people understand which customers we want to serve

A31 Our company uses CRM help us identify high value customers

A32 uses customer information to construct customer profiles which are used to improve the consistency of the customer’s experience


Factor 2: Analytical CRM5 items in total, made up of 4 items from the Analytical CRM inventory (A1, A2, A3, & A5), and 1 item from the Operational CRM inventory (O15).

WHAT IS CRM

METHODOLOGY

CONCLUSION

LITERATURE REVIEW

Phase 2: EFA + ITC

Phase 3: CFA


A1 An important objective of our CRM program is to create a comprehensive customer-related database

A2 deliver customer data to our people at the right time so that they can cross-sell and up-sell customers

A3 deliver customer data to our front line staff so that they can sell, market and service our customers more effectively

A5 enable us to conduct intelligent analyses of customer data to guide our marketing and sales efforts

O15 improve the productivity of our sales people


Factor 3: Operational CRM4 items in total, made up entirely of 4 items from the Operational CRM inventory (O16, O23, O24, & O25).

WHAT IS CRM

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Phase 2: EFA + ITC

Phase 3: CFA


O16 Reduce the cost of our customer-facing operations

O23 Our company uses CRM to automate customer service processes to make them more efficient and effective

O24 Automate marketing processes to make them more efficient and effective

O25 Automate selling processes to make them more efficient and effective

3. Scale Refinement: Confirmatory Factor Analysis

- Gerbing & Anderson claim that Confirmatory Factor Analysis provides a stricter assessment of uni-dimensionality than Exploratory Factor Analysis and item-total correlations . So it is employed in this phase to check the result in the phase 2.

WHAT IS CRM

METHODOLOGY

CONCLUSION

LITERATURE REVIEW

Phase 2: EFA + ITC

Phase 3: CFA


3. Scale Refinement: Confirmatory Factor Analysis

WHAT IS CRM

METHODOLOGY

CONCLUSION

LITERATURE REVIEW

Phase 2: EFA + ITC

Phase 3: CFA


3. Scale Refinement: Confirmatory Factor Analysis Analysis of Model Fit

Overall fitChi-square (CMIN) is the most fundamental measure of overall fit, but the chi-square statistic is sensitive to sample size. Chi-square is recommended for sample sizes between 100 and 200Goodness-of-fit Index (GFI) generates a statistic between 0 to 1, where 0 indicates zero fit and 1 indicates perfect fitThe Root Mean Square Residual (RMSEA), values between 0.05 and 0.08 are acceptable. RMSEA is a better measure for larger samples

Incremental Fit: measures compare the proposed model with the null modelAdjusted Goodness-of-fit Index (AGFI), Tucker-Lewis Index (TLI), and Normed Fit Index (NFI) are measures of incremental fit. The recommended level for these three indexes is 0.90

WHAT IS CRM

METHODOLOGY

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LITERATURE REVIEW

Phase 2: EFA + ITC

Phase 3: CFA


3. Scale Refinement: Confirmatory Factor Analysis. Analysis of Model Fit

- Chi-square was not statistically significant (X2= 84.68, d.f. = 74, p = 0.186). However, sample size means that this statistic can be an unreliable indicator of fit.

- The RMSEA statistic is less than 0.1, which demonstrates an acceptable level of fit

- Neither GFI nor AGFI reach the recommended minimum of 0.90

- TLI statistic indicates a very close fit, being above the recommended minimum of 0.90, and NFI a close fit

Conclusion: the model provides an adequate level of fit.

WHAT IS CRM

METHODOLOGY

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LITERATURE REVIEW

Phase 2: EFA + ITC

Phase 3: CFA


3. Scale Refinement: Confirmatory Factor Analysis. Scale Reliability

- The reliability of each component (Customer Orientation, Operational CRM and Analytical CRM) and the overall (combined) scale is assessed by computing Cronbach alpha

- Reliabilities of the component scales are in the range of 0.751 to 0.891.

- The overall Cronbach alpha for the scale being 0.904

Conclusion: Reliability is satisfied.

WHAT IS CRM

METHODOLOGY

CONCLUSION

LITERATURE REVIEW

Phase 2: EFA + ITC

Phase 3: CFA


Scale Items Customer Orientation Analytical Operational

Cronbach alpha 0.871 0.891 0.751

Overall alpha 0.904

CONCLUSION

The results support the assertion that three forms of CRM can be identified: Strategic (in this paper, Customer Orientation), Operational and Analytical.

- Strategic CRM focuses on customer orientation, with the objectives of a CRM implementation being:

+ to lift customer satisfaction and retention levels; + to win and keep carefully chosen customers or customer segments; + to ensure that all employees understand which customers the organization chooses to serve; + to identify high value customers; and + to construct customer profiles from customer information, which can then be used to improve the

consistency of the customer’s experience

WHAT IS CRM

METHODOLOGY

CONCLUSION

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CONCLUSION

- Analytical CRM focuses on customer data, with the objectives of a CRM implementation being: + to create a comprehensive customer-related database + to deliver customer data to employees at the right time so that they can cross-sell and up-sell customers + to deliver customer data to front-line staff so that they can sell, market and service our customers more effectively; + to conduct intelligent analyses of customer data to guide marketing and sales efforts; and + to improve the productivity of sales people.

- Operational CRM focuses on the automation of customer service, marketing, and selling processes, with the objective of reducing the cost of customer-facing operations

WHAT IS CRM

METHODOLOGY

CONCLUSION

LITERATURE REVIEW

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