Customer relationship management CRM : Implementing

Retail financial services in all markets, including emerging markets, are undergoing major transformation, driven by change, deregulation and customer sophistication. Customer service and specifically relationship management, in particular, are crucial to attaining a sustainable competitive advantage in the marketplace.

The implementation of a one-to-one programme within an emerging economy is the focus of this paper, specifically in the financial services environment. The steps in the implementation of CRM as proposed by Peppers, Rogers and Dorf (1999b) are examined and the effect on customer service in an emerging market is investigated. The findings indicate that there are positive associations with these steps and customer


Changes in customer expectations can be identified throughout the world. Customer relationship management (CRM) strategies have become increasingly important worldwide due to these changes in expectations from customers as well as changes in the nature of markets. Changes have been noted across the world, but opportunities present themselves in South Africa and other developing countries for CRM strategies.

Customer Relationship Management (CRM) is a managerial philosophy that seeks to build long term relationships with customers. CRM can be defined as “the development and maintenance of mutually beneficial long-term relationships with strategically significant customers” (Buttle, 2000). Under certain circumstances it may result in the termination of relationships (du Plessis, Jooste & Strydom, 2001). It can also 1Adele Berndt is currently an Associate Professor in Marketing at the University of Johannesburg. Her areas of specialisation include Services’ Marketing and Customer Relationship Management (CRM) together with strategic leadership areas in these disciplines. She has presented papers various national and international conferences. She is a founder member of the Leadership Forum in South Africa and a member of the South African Institute of Management Scientists (SAIMS).

Frikkie Herbst is currently an Associate Professor in the Department of Marketing Management at the University of Johannesburg. His areas of specialisation include Strategic Marketing, Marketing Research and Research Methodology. He has presented papers at national and international conferences and published articles in various peer reviewed journals.

Lindie Roux is currently working in the Banking industry in South Africa. She studied at the Department of Marketing and Communication Management at the University of Pretoria where she obtained her M Com in Marketing Management in 2001.

be noted that the relationship is developed with strategically significant customers, and hence it is necessary for the organisation to determine the nature of the significance. Traditionally this would be done by determining the value of the customer to the organisation, but other criteria that can be used include whether a customer serves as a benchmark for other customers or whether the customer inspires change in the supplier (Buttle, 2002).

The implementation of CRM is regarded as desirable by organisations due to the benefits that accrue from these strategies among their customers, such as greater loyalty and resulting profits. The focus of a CRM strategy is the acquisition, retention and overall customer profitability of the specific group of customers.

• Acquisition of customers: this refers to the need of organisation to find new customers for their products. This means they are required to develop strategies to attract potential customers to purchase the product. The cost of attracting a new customer is estimated to be five times the cost of keeping a current customer happy (Kotler, 1997).

• Retention of customers: organisations also need to focus on existing customers in order to ensure that they continue purchasing and continue supporting the product. Organisations can increase their profitability by between 20% and 125% if they boost their customer retention rate by 5 percent (Peck, Payne, Christopher & Clark, 2004).

• Profitability: Customer profitability reflects the financial performance of customers with respect to all the costs associated with a transaction (Gordon, 1998). Profitability in the case of CRM is determined in the light of the lifetime value of the customer to the organisation, taking account the income and expenses associated with each customer and their respective transactions over time (Gordon, 1998).

In attempting to understand the implementation of CRM programmes, it must be borne in mind that economies differ in terms of their level of development. Two economic criteria can be used in this economic analysis; population size and per capita income have been incorporated into the calculation of per capita GNP and per capital GDP (Hough, Neuland & Bothma, 2003). This analysis makes it possible to categorise economies as being developed, developing and less-developed (Hough et al., 2003).

Developed economies (such as the USA and Japan) are characterised by political stability, highly-educated and literate populations, high levels of innovation and entrepreneurship as well as high levels of both industrial and information technology. Less-developed economies (such as Bulgaria, Bangladesh and Ethiopia) have political instability (sometimes political anarchy), government inefficiency, low standards of living and low levels of economic wealth. An emerging market (or developing economy) is defined as markets that are in the process of evolving to becoming developed (i.e. higher income) (Hough et al., 2003). It is into this category
that South Africa can be placed.

Developing economies have the following characteristics :
• Improving educational standards, literacy and work skills levels
• Relatively efficient technology systems
• Relative political stability and a movement towards market-based economies
• Rapidly expanding financial services (Hough et al., 2003).

The characteristics of developing economies as listed above form part of the imperatives for the implementation of CRM. CRM includes the use of technology in the building of databases and the use thereof to develop and improve the relationship with the various markets, including the final consumer. In order to exploit this technology, skills among staff are required. Organisations within developing markets have customer information in databases, though many do not have the advanced technology or skills to exploit the information that is stored (Brunjes & Roderick, 2002). This indicates that CRM can be used within developing markets, though organisations will still be required to manage its implementation with care.

The answer to this question has to be no. The reason for this is that not all organisations have customer information, which makes the implementation of CRM impossible. Examples of these products include mass products (Gordon, 1998). Further, businesses where there is a high customer churn (where customers remove their patronage) or where there is a low Customer Lifetime Value (CLV) which impacts on the profitability of the organisation are not suitable to the implementation of CRM (Kotler, 2002). These are true, irrespective of the nature of the economic development within markets. It can thus be said that CRM is appropriate for certain organisations in emerging markets.

Organisations that can implement CRM successfully are those that have a great deal of information concerning the customer and where there are differentiated needs among the customers (Kotler, 2002).
Financial services meet the criteria for the implementation of CRM as indicated by Kotler. Financial institutions have a great deal of information concerning their customers and their needs differ. This means that banks offer different products to different customers. Some customers require a mortgage bond in addition to their current account and credit card, while for other customers, vehicle financing is more important. The financial circumstances of customers differ, resulting in different packages being offered to customers. It is also possible for financial institutions to tailor their packages thereby making them customer specific

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