CRM and Business Strategy

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Strategically, the relational benefits derived from the customer-firm interaction may be particularly influential in creating an advantage for firms due to the difficulty in replicating these types of benefits (Gremler, Dwayne; Gwinner, Kevin and Hennig-Thurau, Thorsten, "Why Customers Build Relationships with Companies-and Why Not") (Jenkins, 1999, p. 371).

To implement a CRM strategy, companies should do the following:

• create a dynamic customer context that can address every customer interaction that is different from a view of the customer constructed from data contained in the applications

• generate consistent, custom responses by delivering a consolidated rules engine for routing, workflow, personalization, smart navigation, and consistent treatment of customers

• build and maintain a content directory to point to company, product, and business partner content and to give to employees, business partners and customers (Anderson, 2000, pp. 480-481)

Impact of Type of "Encounter" on the Development of Customer Relationship Strategy

An encounter can take many number of forms but is always experienced by the customer through one or more of the five senses. Encounters can be categorized using two dimensions: "degree of human interaction" and "intensity of the relationship bond." The latter describes the extent to which a single encounter contributes to relationship building (Botschen, Gunther, "Internationalization of Encounter-Based Relationship Strategies") (Jenkins, 1999, pp. 282-285). Accordingly seven types of encounters have been identified and these have been classified in two dimensions-Intensity of relationship bond, RB (dependent variable, low to high), and degree of human interaction, HI (independent variable, IV, low to high). These have been shown graphically in Figure 1 in the Botschen, Gunther article. The seven types of encounters classified approximately in the increasing order of RB and HI per the figure are:

1. Remote encounter (example-ATMs, vending machines and mail order)

2. Electronic encounter (example-Internet, WWW)

3. Self-service encounter (fresh products in supermarketing)

4. Virtual customer encounter (company chat rooms, private chat rooms)

5. Indirect personal encounter (phone encounters, call centers, mail/fax)

6. Direct personal encounter (face-to-face, multisensory)

7. Direct customer encounter (customer clubs, customer platforms)

As an example, a service-mix encounter cascade for a hotel stay is provided in Figure 2 of Jenkins (1999, p. 286), as noted below:

• customer checks in at reception (direct personal encounter) ->

• taken to room by bell person (direct personnel encounter) ->

• orders a book from Amazon.com (electronic encounter) ->

• joins the chat forum (virtual customer encounter) ->

• uses vending machine (remote encounter) ->

• browses deli corner (self-service encounter) ->

• has dinner in the restaurant (multiple personal encounters)->

• uses hotel executive club (direct customer encounter) ->

• books awake-up call (indirect personal encounter)

A company can design tailor-made encounter mixes to optimize the relationship bonds between their products or services and attract target groups. Some of the specific encounter strategies designed to enhance customer relationships in the home market can be transferred to foreign markets without modification. Others might need adaptation if they are not to have a negative impact on the formation and/or maintenance of relationships with prospective and existing customers (Jenkins, 1999, p. 287).

Behaviors Vs. Attitudes-Implications of Customer Loyalty

Ignoring customer attitudinal criteria may result in a false sense of accomplishment in strategy implementation. High repeat purchases may be a result of situational constraints placed on the consumer. The absence of attachment accompanied by repeat purchase has been termed as spurious loyalty (Sweat, 2000, pp. 99-113). This is the result of competitive promotional strategies, which are regularly altered. Such strategies of ten lead to temporary advantages to a firm unless accompanied by distinctive competencies such as superior distribution systems (e.g., Coke) or low-cost advantages (e.g., Wal-Mart).

Retention Programs and Sustainable Competitive Advantage

Profitability from loyal customers is generated by reduced servicing costs, less price sensitivity, increased spending, and favorable recommendations passed on to other potential customers. Loyal customers are considered business builders because they buy more, pay premium prices and bring in new customers through referrals. It is a popular notion to consider that customer retention is good for the firm and, more specifically, leads to higher profitability. Review of the scientific literature suggests that this contention, though possibly correct, has limited empirical support (Thompson, pp. 71-82). CRM solutions should help in the area of increased customer retention if implemented optimally.

Effective Database Management as Part of Relationship Management Strategy

Database management is the starting point for managing customer relationships and is something that will grow in scale and importance in the future. The only companies able to construct lasting relationships with their customers are those that properly process and maintain an adequate volume of customer information. The use of information technology enables a company or organization to constantly care about the customer and to work with customer information to attract, satisfy and retain customers (Ahlert, Henning, "Enterprise Customer Management, Integrating Corporate and Customer Information") (Jenkins, 1999, p. 261).

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