The IBM Model of Electronic Customer Relationship Management

Table of Contents

1. Introduction

2. E-CRM Backgrounds and Related Theory
2.1 What is E-CRM?
2.2 Elements of E-CRM
2.2.1 Different Approaches to E-CRM
2.2.2 Operational CRM
2.2.3 Sales Force Automation
2.2.4 Customer Service and Support
2.2.5 Enterprise Marketing Automation
2.2.6 Analytical CRM
2.2.7 Collaborative CRM
2.3 A Single View to Customer

3 Introduction to IBM
3.1 Problem Background
3.2 Old Way of Interacting with Customers
3.3 Understanding the Customers
3.4 Re-engineering of customers relationship
3.5 Impact of E-CRM of IBM Operations

4 Conclusion

5 Recommendation

6 References

7 Bibliography

8 Appendix

1 Introduction

With the dynamic nature of the global business environment and increasing competitive pressure, organizations are shifting from product-focused strategy to consumer-focused strategy. With the advent of internet, consumers are becoming more knowledgeable and more aware of the various opportunities available to them. The internet has provided easy access to new products and access to more options leading to an expanded competitive advantage for the consumers, greatly enhancing their choice, value and pricing flexibilities in many cases. Customer retention and loyalty has become a nightmare to many organizations, and organizations are now involved in what can be termed “a relationship competition” between organizations and their clients, as customers can switch from one product to the other at the click of the computer mouse. In order to counter this phenomenon organizations are investing heavily in technologies enabling a customer-focused relationship marketing strategy. With tremendous growth in e-business and web-based services, organizations are therefore shifting to an internet based customer relationship management, hence the birth of electronic customer relationship management (E-CRM).

In this report a comprehensive analysis of how IBM uses electronic customer relationship management (ECRM) to gain insight and understanding of their customer’s needs and want is carried out and also how to improve customer’s relationship by satisfying those needs.

2 E-CRM Background and Related Theory

2.1 What is E-CRM?

Customer relationship management (CRM) traditionally focuses on managing business-to-customer relationships. It is defined as “the process of attracting, developing and maintaining customer relationship over time” (Massey et al, 2001). Research has shown that it cost five times more to acquire a new customer than satisfying and retaining the existing one (Massey et al, 2001). CRM rely mainly on getting a stream of new business from existing customers rather than a stream of new customer. Therefore in order to succeed, an organization must understand what makes a specific customer unique and focus on how to satisfy that uniqueness. Effective CRM can result in increase in brand loyalty and customer retention, hence creating and increasing customer equity. This requires the use of real-time, customer-level information and interaction to create long-term cost-effective customer relationships (Massey et al, 2001). Studies have shown that an emphasis on CRM can lead to mutual benefit to both the company and the customer (Gronroos, 1996).

Electronic customer relationship management (E-CRM) uses the internet to integrate and simplify customer-related business processes, drastically reducing costs of interfacing with customers while achieving the primary goals of CRM – that of enhancing customer’s experience (Scullin et al, 2004). Feinberg and Kadam (2002) suggested that organizations that build E-CRM features into their web portal increases the level of customer’s satisfaction and enhances customer’s loyalty and retention. These include features such as e-mailing capability, information for first time users, site customization, mailing list, ability to complain, frequently asked questions (FAQ), chat rooms, bulletin boards, etc.

2.2 Elements of E-CRM

The key elements of E-CRM are customer interaction system, integrated management channels and analytical tools which enable the creation, capture and transfer of knowledge-base resources. When customer interaction system is deployed, it enables the organization to contain its internal cost while providing easy access to knowledge resources such as human experts and products information. Integrated channel management provides the customer with a seamless experience across all the media while simultaneously capturing and using relevant information to maximize revenue. And analytical tools is useful for the analysis and sharing of customer information and profiles within and across functional areas to enable proactive marketing (Peppard (2000) and Swift (2000)).

2.3 Different Approaches to E-CRM

2.3.1 Operational CRM

Operational CRM provides automated support to business that has direct dealing with customers for example, customer services, sales and marketing. Any interaction with customer and their individual preferences is stored for use by the entire department in the organization. There are three different types of operational CRM, sales force automation, customer service and support and enterprise marketing automation (Anon, 2010).

2.3.2 Sales Force Automation

Sales force automation (SFA) is responsible for the automation of sale force related activities such as: tracking customer preferences, maintaining a lead tracker, demographics contact management, performance management and tracking customer transactions (Rattan et al 2009, Anon, 2010). Call centers are set up by originations to maintain customer information collected thru SFA and the centers provides help to customer with their queries about product and purchase information.

2.3.3 Customer Service and Support

This automate processes relating to service such as product information for consumers, service request, item returns, customers complaint etc (Rattan et al 2009, Anon, 2010).

2.3.4 Enterprise Marketing Automation

Enterprise marketing automation (EMA) automates marking task used for contact and lead generation. It’s used to collect information about the business environment such different trends in the market and information about competitors (Rattan et al 2009, Anon, 2010).

2.3.5 Analytical CRM

Analytical CRM is the process of analyzing customer’s information with a view to understanding of customer’s behavior thereby enabling the organization to build a stronger relationship with the customers. The data obtained from the analysis can be deployed in such a way that leads to customer’s retention. Analytical CRM classifies customers according to their purchasing patterns which enable the organization to cross-sell products to customers (Rattan et al 2009, Anon, 2010).

2.3.6 Collaborative CRM

Collaborative CRM is refers to the sharing of information within the different departments in an organization. This information can be very useful to sales, service and marketing departments. For instances, information gathered through feedback by customer service department or technical support department can be used by the marketing or sales department to better understand customers needs and perspectives. This information can also be used for the deployment of new product or improving on an existing product or service (Rattan et al 2009, Anon, 2010).

2.4 A Single View for Customer

A completely integrated E-CRM system is characterized by faster and automated services online and availability on a 24 hours basis. This allows an organization to communicate with its customers using a single and consistent “voice” regardless of the communication channel. To achieve this, there is need for the company to present itself as a single entity to the customer by providing a seamless experience between different business units and departments (Appendix: figure 3). This requires that the organization applies E-CRM tools to integrate front and back-office activities as well as cross-divisional functions (Web Associates, 1999). With the appropriate tools, everyone in the organization will have a unified view of the customer by having access to the same transaction history and information regarding the client (Scullin et al, 2004, Appendix: figure 1).

Kalakota and Robinson (2001) suggested that E-CRM can be categorized into three phases and that each of these phases are designed to manage customer life circle and maximized customer lifetime value (CLV). These phases are: acquiring new customers, enhancing the profitability of existing customers and retaining profitable customers for life (Appendix: figure 2). Success in these phases depends on the process and the quality of information acquired by the company. An organization that collects its customer related data on-line rather than the traditional method of collecting data will have access to already formatted data which can be easily analyzed. By streamlining its information collection process, a company will have access to qualitative and timely information that enhances its ability to predict customer behavior, thereby leading to a more targeted and customer relationship strategy. E-CRM enhances the value of relationship between organization and customers as it helps the organization to provide services and products that are tailor-made for the client. At the same time, the organization cultivates a base of low-risk, high-value customers (Kennedy, 2006).

3 Introduction to IBM

IBM is a multinational technology and consulting firm that manufacture and sell computer hardware and software and offers services such as infrastructure, hosting and consulting in areas ranging from nanotechnology and mainframe computers. IBM started business in 1911 as a Computing Tabulating Recording Corporation producing punch card tabulating machines. In 1953, they designed its first computer called 701 and dominated the new field of mainframe and minicomputers. In 1981, IBM introduced its first personal computer called IBM PC which set a standard in the industry, but due to underestimation of the market lost its market share to PC vendors such as Compaq (Anon, 2005).

3.1 Problem Background

IBM is renowned as the lead manufacturer in mainframe computer and they were market leaders between 1960 and 1970. But the emergence in 1980s of smaller, cheaper, networked computers resulted in increasing competition and more choices for customers. IBM saw their market share dropped from 30% to 19% between 1986 and 1992 which led the company to evolve a drastic measure of cutting cost by reducing staffs strength, instead of focusing on customer relation to stem the tides of customers’ defection. By mid 1990 when the company realized that downsizing did not lead to improvement in sales and coupled with the ever changing market environment, IBM resolved to rethink the basic way they service their customers. By late 1994, IBM setup and cross-functional task force comprising of representatives from marketing, business and product development with the sole objectives of addressing the declining market share and retention of customers (Massey et al, 2001).

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