Luận văn customer relationship management in bank the case of vietinbank ’s hanoi branch

UNIVERSITE DE NANTES Cohort 2015-2017 Master’s Thesis Customer Relationship Management in Bank — The case of VIETINBANK ’s Hanoi Branch Author: Dang Trung Hieu Supervisor: Nguyen

UNIVERSITE DE NANTES

Cohort 2015-2017

Master’s Thesis

Customer Relationship Management in Bank

— The case of VIETINBANK ’s Hanoi Branch

Author: Dang Trung Hieu

Supervisor: Nguyen Phu Hung

Hanoi, September 2017

CHAPTER 1 INTRODUCTION OF DISSERTATION

LL The rationals of the thesis -

1/2 Objectives of shHỦY on seocoee

1.3 Questions of study

1.4 §copz 0ÍTcseiHth ăcoeocsreererooee

1.5 Methodology and Data "_—

151 Methodalogy of the esearch 1.5.2 Description of Data, Population, and Sample

1.5.3 Tools of survey and analysis

1.6 Conclusions and Roadmap of Disscrlation

CHAPTER 2 BACKGROUNDS OF VIETINBANK

2 VIETIN BANK’s Hanoi braneh

2.3 General challenges facing VIEEINBANK in general, and Llanen Ja Branch in patioular¥?

CHAPTER 3 LITERATURE REVIEW

3.1 What is Customer Relationship Management?

42.6 Adequacy of CRM procedures

428 The necessity to create a separate speciatized ( CRM { department 38 42.1 Quality of the stalls working on CRM

43, Discussions of survey results

CHAPTERS RECOMMENDATIONS AND CONCLUSIONS

5.1 Summary of findings of the dissertation

5.2 The tolal approach to enhance building customer relationship that this thesis follows4!

3.3 Recommendations to Enhance Customer Relationship Management at Hanoi Branch42

5.3.1 Making strategic Investment program in CRM - - 43 5.3.2 Solutions fo erihunec the qualily of customer-care service 44 5.3.1 Solutions to enhanoe the adsguaey of CRM proeedtes 47

5.3.3 Create an environment promoting CRM practices 50

5.8 Conclusions

LIST OF REFERENCES

APPENDIX S4

'Tabls 2-2: Parfarnianee versus Obejeotives 2D

Table 2-5: Porforimames of the Hanoi Branch of Vietin Bank - 16 Table 3-I: Characteristics of e-CRM - 22

Table 3-2; Requirements and projected costs of a specialized CRM analytical unit 45 Table 5-3: Expected investments on CRM software .49

LIST OF FIGURES

Figure 2-1: Organizational strueture of the VIETINBANK - 6 Figure 3-1 CRM relationship (source: Kubi and Doku) - 24 Figure 3-2: Sfages to Implement CRM „.30

Figure 4-2: Overall quality rating of VIETINBANK services - 34

Figure 4-4: Rating quality of customer-care service of VIETINBANK 235 Vigure 4-5: Ths credibility you pereeive of VIETINBANK - 37

Figure 4-7: Necessity to create a separate specialized CRM department 2.38

Figure 5-1: Total approach to enhance CRM performance for the VIETINBANK’s Hanoi

FOREWORDS

‘Today, banks are facing an aggressive competition and they have to make efforts fo survive in

4 compelitive and uncertain market plac Many bariks have realized thal managing customer relationships is a very important factor for their success, Customer relationship management (CRM) is a strategy that can help a bank to build long-lasting relationships with their

customers and incrcase their profits through the righ! management system and the application

of customer-focused strategies CRM in the banking sector is of strategic importance In this thesis, a descriptive case study of VIETINBANK is presented, The aim of this thesis is to

analyze the necessity, the design, and the implementation of CRM in VIRTINBANK ,

identify the benefits, the problems, as well as the success and failure factors of the implementation and develop a better understanding of CRM impact on banking compelitivenass as well as provide a greater understanding of what constitutes good CRM

practices for VIETINBANE

CHAPTER 1

INTRODUCTION OF DISSERTATION

1.1 The rationale of the thesis

In Vietnam, banking is a sector in fast development All commercial banks are conscious whether their existence and development depend on achieving customer, satisfying them, maintain their loyalty All commercial banks have regarded customers imuch like a top priotity at all times in all their activities VIETINBANK js in a hard time of competition to

retain customers from a number of newer banks VIETINBANK needs a strategic tool to

identify the bank's most profitable eustomcrs and prospects, devotes time and attention to expanding account relationships with those customers through individualized marketing, repricing, discretionary decision-making, and customized service-all delivered through the

nmicls that the bank

Today, many businesses such gs banks, insurance companies, and other service providers

realize the importance of Customer Relationslip Management (CRM) and its potential to help them acquire new customers, retain existing ones and maximize their litetime value At this

point, close relationship with customers will require a strong coordination between sales and

marketing departments to provide a long-term retention of selected customers Being top state

bank in the past, VIETINBANK then did not have to struggle for acquiring new customers,

Devause most of ils customers are large slale-owned enterprises Just serving these SOT

customers could bring in enough revermes for VIETINBANK However, relative safe

customer sources lead to poor product and service quality as well as poor customer services

qualily In addition, the number of stale customers dectine quickly im the Tast 5 years, forcing

VIETINBANE to redircet to a new source of custormers that il docs not have cxpcricnee before the private sinall and medium enterprises and the individual/household customers VIETINBANK is behind other private banks in serving these customer groups, thus is losing

parts of ils customers lo compelilars

‘This is the reason that this thesis will study the role of Customer Relationship Management in VIRTINBANK and the nzed for Customer Relationship Management 1o increase customer value by using some analytieal methods in CRM applications Under this VIETINBANK case study, 1 chose the topic: “Customer Kelatlenship Management — the case of

‘VIETINBANK’s Hanoi Branch”

1.2 Objectives of study

The objective of this thesis is to investigate and evaluate CRM situation of VIETINBANK , understand the perception of VILTINBANK staffs on how to improve the situation, and to

propose potential solutions or directions on building the capacity to meet with prowing

markel requircments and to improve the intemal performmanee

1.3 Questions of study

1 What are the status-quo of VIETINBANE and how CRM is critical to the survival of

VIETINBANK ?

2 How has the VIETINBANK managed CRM?

3 What are the focal points that the manager of VIETINBANK should consider to

Due to the difficulty of data, the thesis will collect data only for the year 2015 to now

1.5 Methodology and Data

1.5.1 Methodology of the research

Thesis

framework model to analyze drivers for CRM Using that model over primary data, I specity the challenges VIETINBANK is facing in managing CRM

will first do a lilcralure review of CRM Then, from the litcrature review, il ercates a

“rhe thesis expects to conduct survey using data mining tasks such as cluster profile analysis, concept descriplion, and deviation detection The surveys would target specific customer populations segments, not all

1.5.2 Description of Data, Population, and Sample

The thesis also analyzes secondary data collected ftom academic journals, websites, and governmental offices to draw a comprehensive picture of the whole banking industry and assess the comparative competence of the VIETINBANK ’s CRM in this context Lessons drawn from literature will serve as basis for recommending solutions to enhance the CRM

performance for VIETINBANK

My targeted surveyees inchade:

1.5.3 Tools of survey and analysis

‘The dissertation is going to use the following tools for survey and analysis

* Google form for online questionnaire

© Survey in paper fonn

1.6 Conclusions and Roadmap of Dissertation

After the first chapter of introduction, we do an analytical review of the VIETINBANK in the

Chapter 2, the literature review on the CRM management in Chapter 3 The Chapter 4

describes data results from the survey, analyses and discusses the findings Finally, the

Chapter 5 recapitulates the findings and contributions of the dissartation

CHAPTER Z BACKGROUNDS OF VIETINBANK

Vision of VIETINBANK is to become the leading financial and banking corporation in

‘Victnam that operates in diverse arcas, as well as provides products and services that conform

to international standards, aiming to improve the values of life VIETINBANK focuses on

Core Values Customer-oriented operations

VIETINBANK has gone over 28 years of incorporation and development (VielinBank, 2017,

po

Phase 1 (1988 — 2000): stablished and transformed into a two-tier bank, officially put Vietnam JSC Bank for Industry and Trade into operation

Phase IT (2001 — 2068): Snccessfully implemented the organizational restructuring project,

targcting debts handling, gencral policics & mechanisms and business operations

Phase IT (2009 to prosonl): Successful Taunched IPO and conducted a complete system innovation towards modemization and standardization in all aspects of banking activities;

converting organization model and corporate governance in accordance with international standards and practices,

VIETINBANK operates with the Busi

Phitasophy of

* Saft, offective and sustainable

= Loyal, dedicated, passionate & committed, wise and principled

¢ The prosperity of VIETINBANK customers is VIETINBANK ’s ultimate success

2.1.1 Listing

According to the Armual roporl of VIETINBANK (VietinBank, 2017, p 9), VIETTNBANK stock has been officially traded on Ho Chi Minh City Stock Exchange (HOSE) since 16/07/2009

‘Type of share: Ordinary shares

Tn addition, with the extension of VIETINBANK °s system and the developracnl of branch

also change about the structure annually such as tuming to widen out, having more departments, firing ot hiring new employees depend on the requirements of the job and the

ability of staff to mect the new demands and requirements Today, the structure of

VIETINBANK is described as diagram below

Accarding to the official websited of the bank, the VIETINBANK has 7 independent accounting subsidiaries, including VIETINBANK Leasing Company, VIETINBANK Securities Company, VIETINBANK Asset Management Company, VLETINBANK Insurance Company, VIETINBANK Fund Management Company, VIETINBANK Gold and Jewellery

5

Company, VIETINBANK Global Money Transfer Company VIETINBANK also has three non-profit making units, including VIETINBANK Information Technology Center, 'VIETINBANK Card Center and VIETINBANK Training Center

Figure 2-1: Organizational structure of the VIETINBANK

VIETINBANK branch network is comprised of:

¢ Head Office located at 108 Tran Hung Dao Street, Hoan Kiem District, Hanoi;

© ISS local branches in 63 cities and provinces across the country,

6

© 02 foreign branches in Germany and 01 Subsidiary in Laos PDR;

© 02 Representative Offices in Ho Chi Minh City and Da Nong;

© 01 Representative Office in Myanmar

In addition to the extensive network, VIETINBANK has established correspondent

relationship with over 1,000 financial institutions of more than 90 countries and territories

worldwide

VIETINBANK has many subsidiaries, as recapitulated in the following table

Table 2-1: List of Subsidiaries of VIETINBANK

District, Ha Noi

District, Ha Noi

3 Management and Asset Street, District 1, Management 100%

126 Doi Can

Hanoi

District, Hanoi and Trading

VIETINBANK Fund 34 Cua Nam Steet, raid

6 Management Com 8 pany Ltd Hoan Kiera District, Hanoi Management = 100%

VIETINBANK Global Money 126 Doi Can Monetary

Ÿ ‘Transfer C ompany Me Ltd Ba Dinh District, Suret, Intermediation 190%

7

Ha Noi

No 029

Khounboulom,

District, Viengchan, Laos

97A Nguyen Van

Troi Banking &

y - Street, Phu Nhuan — Finance Seo

District, TPHCM

521 Kim Ma

Insurance Company Ltd Ba Dinh District,

2016 General Meeting of Shareholders were successfully met, benefits of the shareholders

were ensured, In addition, VIETINBANK maintained its spot in the list of highest tax-paying companies in the country

¢ Total assets: VIETINBANK achieved the asset growth rate of 22% against 2015, reached

VND 949 trillion, met 107% of target set at the 2016 General Meeting of Shareholders

We were proud to have maintained our leading position in the local banking system

¢ Fund Mobilization: Thanks to numerous fund mobilization and structuring solutions,

VIETINBANK continued to maintain stable capital growth in the past several years In

2016, we focused on the mobilization and utilization of the abundant fund resources at

reasonable costs in both Vietnam dong and foreign currencies Total funding as at

31/12/2016 was VND 870 trillion, an increase of 22% compared to that of 2015, reached 107% of target set at the 2016 General Meeting of Shareholders Notably, funding from

customer deposits registered a growth rate of 33%, the highest growth rate among all local

joint banks

© Lending activities: Along with Vietnam’s future prosperity, VIETINBANK plays an

important part in the country’s economic development via adequate and timely fund

provision, which helps boosting production process for companies, encourage

consumption, and support sustainable economic growth Our total credit exposure as at

31/12/2016 reached VND 722 trillion, equivalent to 102% of target set at 2016 General

Meeting of Shareholders, increased by 18% compared to that of 2015

® Investment: In addition to the traditional lending and funding activities, we also emphasize on the diversification of products and services as well as investment product development as a market leader By the end of 2016, our total investment was VND 237

trillion, up 21% compared to that of 2015

© FOREX Trading: Our FOREX trading activities registered good growth rate in 2016 with

the second largest market share Positive results were successfully achieved: Turnover from FOREX trading volume on primary market was up by 8.2% and profit increased 20% compared to that of 2015, delivered FOREX profit up by 20% compared to the previous year VIETINBANK continued to actively contribute to the stabilization of the

forex market in 2016 in accordance with the directions of the SBV

Business results of subsidiaries: Subsidiaries and foreign branches achieved strong growth

rate compared to the year before with pre-tax profit of 443 billion, up 13% compared to that

NPLs/ Gross loans 0.7% 0.9% <3% Achieved

(Source: VietinBank, 2017, trang 25)

Table 2-3: Major performance indicators

‘Not proft from operating

Provisions torcedt = VND billion (5022) (479) (3923) G23) (4387)

Proft botoce tax ne see 735 73087781 aus

Copperneincemo tox {NP imal Hé3) 5) (83) — (0886)

Profit after tex VD ten a8 — S7U S727 S808 : ab?

NPL/ Gross Loans Ố O90% 082 — 135%

ICAR)

2.1.4 Labor

VIETINBANK has 3 groups of employees and managers, as presented in the table below.

(Source: VietinBank, 2017, trang 45)

‘\VietinBank ranked! 1,808" In 2016, an Improvernant of %4 spots since last year

2 Brand Finance: Banking 400 - The world’s most valuable

banking brands Vietnam's 10 most valuable trademarks

VietinBank was the only local financial institution to be recognized In the world’s Top 400 banking brands with brand value of US$ 249 milion cand A> brand rating by Brand Finance Vietingank was also recognized in Brandt Finence’s 10 most valucible tracemars ond the strongest growing tradernaark

in Vietnam

3 National Brand

For the fourth consecutive year, VietinBunk was honored to accept the National Brand! Award, This prestigious award, initiated by the Prime Minister, was presented by National Trade Promotion Agency - Ministry of industry and Trade, National Brand Council and Secretanait of National Brand Award.

4 Vietnam's Top 10 Strongest Trademarks VistinBank was honoured ta be recognized in the list of 10 strongest trademarks

In VeUvn for the 12" consecutive year This word recognizes local fms

and technology to bok ai lavers Vie eer csp erin aes

6 ‘For the Employees’ Award

VietinBank was awarded with "For the Employees" Award as well as the Prime:

Minister's Certificate of Merit recognizing our support to employees

7.2016 ASOCIO ICT Award

®As0cIg VietinBank was the only local company to receive the award of outstanding

Em digital applications, presented by ASOCIO - the biggest and the most

Important ainnucil IT event of Asia

@ 8, Prestigious awards from international card organizations

MasterCard VietinBicink was exceptionally proud to accept five aveareis from JCB for Highest

Payment Volume; Lorgest number of issued cards, Leading bank in new product development, Strategic Partner Bank and Highest Card Usage Volurne Three VISA aviardls were also prosented to the Baink by Vise! for Highest Average Payment

Volume on Viso Signature Cords, Highest Cord Usage Growth and Highest

Oversea Payment Volume.

9 10 Best South East Asian Firms

Cooperation Development (VILACAED), honoring VietinBank’s achievements in

‘outstanding business results, leading position in local market anc! in deepening

VIETINBANK ' services include Fund Mobilization in the form of Term Deposits for Retail

and Corporate clients, Foreign Exchange, Guarantees, International Settlements, Letters of

Credit, Capital Markets, Money Markets, Bonds, Equity Investments, Correspondent

Banking, Internet Banking and other innovative financial and investment services and solutions licensed by the State Bank of Vietnam

2.1.7 Core values

The following figures are taken from the annual report 2017 of VIETINBANK (VietinBank,

2017, p 11)

* Customer Orientation: "Serving our customers is at the heart of our business and we are

committed to constantly explore better ways to deliver advanced services and a differentiated experience to meet each and every financial need of our clients"

* Towards Excellence: "With internal strength and resources, VIETINBANK management and

staff are conmitted to reform towards perfection"

+ Dynamic, creative, professional & modem: "We understand that our continued success as a

financial services organization is dependent on the innovative, dedicated services we provide

We always put our relationships with the clients and partners first in every-thing we do"

+ Integrity, Honesty & ‘Ivansparency: "We have solid foundation of openness and

accountability We ensure each and every transaction is transparent and available for public

viewing"

+ Respect: "Fair dealing is hasis of our business, we treat ¢,ery individual with respect and

dignity"

+ Brand protection and development: "VZETINBANK staff and management are proud to be

responsible for the reputation ef our brand name and always carry tt with honour and dignity*

* Sustainable development and social responsibility: "Oz motivation is driven by constant reform and creativity with clear ohjectives of strong growth prudent business & sustainable development It ix an honour ta give VIETINBANK staff the opportunities to participate in vartaus volunteer programs and to allaw them to reach out further to the conmmunity and take

responsibility for the society and fellow citizens

2.411 Targets

2017 Largets

Entering 2007, with best cfforls, VIRTINBANK will continue to closcly follaw sot - onl targets, focus resources to promote sustainable business growth in order to maintain our leading position in the market on the basis of ensuring efficiency and asset quality control

We will place strong cenphasis on the devclopment of modom products anil services, particularly payment banking services to enhance the transition of income restructuring and improve our competitiveness, We will constantly standardize all aspects of VIETINBANK ’s operation including the improvement of risk management capacity, infrastractura development and the modemization of infomation technology according to intcrational standards and practices, building a solid foundation towards the goal of being a regional bank Medium and Long— term Development Strategy

VIETINBAXK strategic goai for the middle and long term remains to become one of the leading banks in the region through improving competitiveness and govemance, developing strongly and comprehensively in all aspects of our business, expanding both regional and international networks and becoming an important business matching bridge to promote

economic relations between Vietnam and other countries around the world, enhancing

VIETINBANR’s brand demestically and internationally,

VIETINRANK understand that modification of business models and sales method arc

sat

breakthrough factors to cnsure sustainable growth and improve the competitiven

VIETINBAXK amidst the increasingly strong wave of integration in the near future We will

continue to grow our business while staying foens on catching up with the latest banking and

financial trends of developed cconomies around the world as well as (he must updated

technology movement to promote digital banking and the development of advanced products

and services with high technological content to meet the rising demands of our enstomers

Objectives for corporate environment, society and community sustainability

‘As aJarge commercial bank in the country, apart tom focusing on performance improvement

and profit enhancement from banking business, VIETINBANK always develops towards

community ir Going forward, VIETINBANK will continue to share with the

community, the Party and the Govemment in sovial welfare, targeted mainly on social

security work and implementing various gresn projects and environmental protection projects

with tocal enterprises while promoting investnont for cducation, healtheare, and

infrastructure which strongly reflect the truc expression of our philosophy “Improving the

value of life”

2.2 VIETIN B

‘The VIETIN BANK"s Hanoi branch is the subject of study of this thesis The Tlanoi Branch is

one of the largest regional branch of VIETINBANK

K’s Hanoi branch

The performanes of Ihe Hanoi Branch of VIETINBANK is sunnnwaizzd im the table below

Table 2-5: Performance of the Hanoi Branch of Vien Bank

1, From business cnstomers 13,593 24.174 31,040 35,432 38,621

#6 Growth 21 a

Souree: internal report

Unit: Billion Viernamese Dong

2.3 General challenges facing VIETINBANK in general, and

Hanoi Branch in particular

ago when major customers are state owned enterprises, the customers now are much more

diversified with a large part are private small and medium enterprises and households Thus,

‘the tradition procedures and regulations arc no longer fit and must be modificd to fit with

current context,

control

In addition, the tightening risk management requirements set by the State Bank of Vietnam

(SBY) in Circular 36/201L4/1'T-NHINN and Circular 06/2016/IT-NIINN ơn safsty limits and

pmdcntial ratios in the operation of banks, Circular 02/2013/TT-NHNW and Circular 09/2014/FT-NHNN on Ioan classification and provision had certain impacts on the overall business results of local banks if effective management measures were not comprehensive employed Morcover, the issuance of Circular 41/2016/TT-NHXN by the SBV regulating the capital adequacy ratio according to Basel II (standardized method) required VIETINBANK to conduct thorongh research and actively structure our loan book in line with new requirements, ensuring business performance optimization on the basis of cosl reduciion and effective use of capital

2.3.3 Market risk

‘The 2017 world economic outlook is expected to be more volatile due to changes in political and economic policies in tearing econemies such as the US, China, Trance, Germany, especially when the UK to start Brexit process before cnd of March 2017, While the European economies continue to address the consequences of Greece’s public debt crisis and the significant influxes of migranls and refugees as well as China is experiencing Mlucluations in their financial and monetary system, the US seems to be leading of the world economic prowth in 2017 with new economic protection policies, further investment in infrastructure,

tax reductions set by US President Donald Trump The possibility of strengthened US

dollar coupted with the US ccanertie growth and the expseled tise of interest Ta

FED in 2017 will put certain pressures on USD/VND exchange rate

by the

Recovery in energy market is also expected in 2017, especially after the OPEC countries reached a deat lo cut oil production earlier this year Towever, uncertainties remain as a surge

in US dollars might cause a negative impact on oil prices Gas price, another important input

of the world economy, has a major impact on inflation ‘Therefore, the energy market evolution will amdoubledly affool the funding end Tending ratos across the globe

In addition, under the provisions of Circular 06/2016 (the amended version of Circular 36/2014), the ratio of short term capital to long-term loans decreascd compared lo that of

2016, and this ratio requirement will continue to decline in 2018 as directed by the SBV As a result, pressure on liquidity and lending activities of the bank is expected to tise which demands us to focus on improving our asset and capital structure towards promoting short- term Ioans and discouraging long-term loans

2.4 Challenges facing VIETINBANK ’s I[anoi division office

‘Chis part covers some of the most challenging issues facing Ha noi Branch, which obstructs bank in managing iis

Jalionships wilh its customers, Firstly, CRM software is difficult for employees to use Having many useful functions of CRM software, staffs yet trouble in using This shows thal customer profiles are nol used effectively,

Scconully is the shortage of expericneed staffs, Most cmployees of VIETINBANK arc young and have no rich experiences in field of banking while banking is a specialized job Thus, VIETINBANK is also facing some challenges in this point

‘Thirdly, VIETINBANK got many challenges in reducing the cost of selecting and then managing the righl clisnls scl To approach new cuslomncr, staffs must lake many phone calls

of even beg intermediaries and they must bear all the costs such as telephone fees or the

commission fees, and so on

And one more challenges is that determine which products and services should be sold to which customers, profitably, and then help bank implement its sales plan Bach year, all

‘tuansaction offices, along with VIETINBANK , must complcte all targets that the Head Office entrusts, Because of the difference of customers, it is a typical challenge for each employee

For example, sales plan of VINTINANK is to earn VND 3 billion in revennes in March,

2017 And lo conrplele the task in one month, they must dal 5 sets of Himited guarantes, 5 sets

19

of unlimited guarantee, and 5 units of loans to purchase cars But Ha noi branch does not know the needs of cusiomners, this make il gel many obstructs in achieving expected plan

‘The final one is how lo caordinate the mulli-producl, mulli-country relationship in real lime Fach country has private laws and their products may differ from olhcr countries Thus, the coordination between two or more products and more than two counties sometimes gets disadvantage and it is one of challenges facing {la noi branch

2.5 Conclusions

The section above has reviewed current status of VIETINBANK The nex! section is going 1a

20

CHAPTER 3 LITERATURE REVIEW

3.1 What is Customer Relationship Management?

3.1.1 CRM concept

CRM has become widely recognized There are number of studies with many definition of

CRM There are several definitions of CRM, as recapitulated below:

According to Swift, CRM is “An enterprise approach to understanding and influencing

customer behaviour through meaningfid communications in order to improve customer acquisition, customer retention, customer loyalty, and customer profitability” (Swift, 2001),

According to Parvatiyar and Sheth, CRM is “a comprehensive strategy and process of acquisition of, retention of, and partership with selective customers to create superior value

for companies and their customers” (Parvatiyar & Sheth, 2000)

According to Dyche, CRM is “Infrastructure that enables the delineation of increase in

customer value and the correct means by which to motivate valuable customers to remain

Joyal” (Dyché, 2001),

“An approach in which businesses market their praduets and services through relationships

and interactions with multiple markets, most notably the customer market, often taking

advantage of information technology (IT)-based interactivity” (Ryals and Payne, 2001)

The CRM depends on five-pillar approach (including (i) segmentation, (ii) information

networking, (iii) algorithms, (iv) IT systems, and (v) sales and client support) to control

companies wanting to implement relationships with their clients (Lindgreen and Antioco,

2005) As such, the CRM involves a strategic use of information, processes, technology, as

well as people (Kincaid, 2003)

With the main objectives of acquiring and retaining customers, CRM is the efforts to create, develop, and enhance the individualized relationship with carefully targeted customers and

21

customer groups so that to maximize total customer lifetime value” (Payne, 2000) That is

done by delivering superior customer values and satisfaction, through the integration of

different activities for anticipating, understanding, and meeting customer needs CRM makes

the interaction between customers and the firm become more informed, closer, thus keep both

partners more focused CRM is very demanding, and require more attention from staffs to

make the relationships to last longer (Kotler and Armstrong, 2004; Anton and Hoeck, 2002;

Khalifa and Shen, 2005),

3.12 e-CRM

Studies found that using Internet technology helps reducing costs and building relationships performance and effectiveness The use of the Internet as a channel for interaction between customers is a faster ways, able to keep history, thus both partners will be more well- informed However, interaction through this channel would be more demanding, and require

more efforts (Feinberg and Kadam, 2002)

The review of the relevant e~CRM literature shows that many researchers have watched the e-

CRM by different aspects and perspectives

Phavaphan Sivaraks (Phavaphan Sivaraks, 2011) summarizes e~CRM characteristics in the

* Uses electronic channels

+ Uses digital channels * Process automation

* e-business context * Data derived from Internet

* Network touch-point * Customise

+ Interaction chat + Data mining

* VOIP

2

(Retrieved from Phavaphan Sivaraks, 2011)

E-CRM is defined as an component of online distribution and marketing that expands the traditional CRM techniques by integrating toclmologics of new cloclsonie channals, such as

Web, wireless, and voice lechnotogi

the overall CRM strategy of an enterprise (Retrieved from Phavaphan Sivaraks, 2011)

and combining them with e-business applications imo

Researchers identify two main types of c-CRM

@ Operational CRM concemed with the customer touch-points, inckuding in-person,

Web-based, e-mail, telephone, direct sales, and fax;

Gi) Analytical e-CRM: focuses on using technology to process and make sense of large

amounts of cuslorner data

‘The integration between CRM systems and all chammels across all areas in the company is commun and critical to a company's s\

companics Lo manage customer interactions with least or ever no human conlaet to reduce the

cost of interaction (Anon, 2002; Kennedy, 2006)

3.1.3 Benctits of CRM

Once a business has implemented CRM, it expects preatest gains fom CRM implementation

to be in the arcas of cuslorner relationship quality and relationship outcome The CRM operations would create 2 competitive edge for an organization to fhrive in cormpelition, and

‘hat also has a positive impact on internal organizational performance (Sin, Tse, and Yim, 2005)

‘The advantages of the application of CRM approach/strategy to its service interaction marketing include quick service response time, hwo-way inleraction service relationships, and

‘the ability to provide service for customers fiom anywhere af any time

Many studies have rescarched CRM outcomes from the cuslomer's point of viow from thrac perspectives: (i) customer perspective, (ii) business perspective, and (ii) the technology

perspective

First, ftom the customer perspective, analysis identified five main characteristics of an

effective CRM:

23

@) Marketing efforts are oriented toward longer-lasting and closer relationships with

individual accounls (Jackson, 1985) Gi) Establishment of customer trust in CRM systems

Gii)Delivery of the right products and service to customers at the right time through the

righ! channel, (iv) Multiple way to add customer value through interaction points with the organization, (v) Channels for customers to provide feedback so that the organization can be informed

in modifying product design, producing personalized and customizable product

and scrvices,

Researchers have uscd the balanced svorcomsd to crcale a measurement tool for CRM implementation, for example, one of the constructs of customer perspective were improved customer awareness and perceptions, increased value and frequency of transactions, and satisfaction and loyalty of online customers

Moreover, customer-centric evaluation of CRM inchide the followmg components

@ customer lifetime value and loyalty,

Gi) customer satisfaction, retention, and acquisition:

GiiJcustomer reaction: and

(iv)customer knowledge, profiling, and understanding

Second, from the business perspevtive, CRM is “ an approach that creates a competitive

edge for an organization”, and CRM is also“ has a positive impact on organizational

performance” (Sin, Tse, and Yim, 2005)

Figure 3-1: CRM reletionship (source: Kubi and Dak}

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Successful CRM

HSN

Orgamzational Ownership

In addition, many studies found 4 benefits from CRM or associated with building customer

relations management system, as below:

© CRM allows cross selling opportumitic:

For firms, the attractiveness of building customer relationship is the future or potential of cross selling - the selling of additional products and services to current customers For

lending to low cuslomer cxpendilure over time

those customers who are more loyal, they will buy more and if satisfied with the products

or services of company and the company itsclf, the customers would likely to buy from the same sellers Of course, that depends on if the finm has the products and services the

customers want

© ‘The customer relationship management allows firms to develop a strong process inanagement lo fargel, to acquire, and lo promote the businesses to considerable higher levels, CRM helps retain customers and promote their loyalty; that means customer would stay longer with the firm, contribute more revenues to firm as they buy at larger amounts and mare frequent

2 As

M resullls in customers are keen to the firm, they become more loyal, that in lun

sake it harder for competitors to attract them That deters competitors fiom attacking

traditional customer base of the firm, because satisfied customers would be very likely Jess susceptible to appeals ftom other product offers

© CRM helps understanding customers deeper, reducing costs associated with acquiring

new customers, telaining them, protecting them from other competitors, and atizacling

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