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Transcript
Conceptualising Social CRM in SMEs
Abstract
Customer relationship management (CRM) is a critical research domain and Its importance is
only increasing as more and more enabling technologies are available to businesses (Boulding et
al., 2005; Cooper et al., 2008; Verhoef et al., 2010). This paper seeks to conceptualise CRM in an
age where digital and social technologies are prominent and disruptive marketing tools.
Particular capabilities affected are customer engagement and information management. This
paper places ‘Social CRM’ in the context in the small and medium-sized enterprise context,
where these organisations are particularly suited to CRM and may also be suited to the
relationship-oriented characteristics of social media technologies. Previous research is drawn on
to underpin this conceptual paper, which sets the scene for empirical research.
Introduction
Customer relationship management (CRM) is a concept that is as old as business (Sheth and
Parvatiyar, 1995b; Drucker, 1954; Payne and Frow, 2006). CRM is often confused with
relationship marketing, and in actual fact there appears to be no general consensus on the
difference between these two phenomena in previous literature (Parvitiyar and Sheth, 2001).
However, the best differentiation may be that, where relationship marketing is concerned with
managing relationships with multiple stakeholders, CRM is concerned with managing the most
important relationship; that with the customer (Ryals and Payne, 2001; Chen and Ching, 2007).
CRM certainly is a critical research domain (Boulding et al., 2005; Cooper et al., 2008; Verhoef et
al., 2010). Its importance is only increasing as more and more enabling technologies are
available to businesses. This paper seeks to conceptualise CRM in an age where digital and social
technologies are prominent and disruptive marketing tools. First though, CRM is defined as ‘the
cross-functional integration of processes, people, operations, and marketing capabilities that is
enabled through information, technology and applications’ (Payne and Frow, 2005:168).
Customer Relationships
The relatively new term of ‘customer engagement’ was devoted a special issue in the Journal of
Service Research in 2010. Fundamentally, it questions the classic view that the customer is
exogenous to the firm and is the passive recipient of marketing efforts (Deshpande´ 1983).
Instead, customers are now active participants in a process of value-creation that reaches from
the marketing effort as far as business strategy (Bijmolt et al., 2010; Hennig-Thurau et al., 2010).
In essence, the relationship between the firm and its customers becomes much closer (Bijmolt
et al., 2010). This view of marketing, and of business in general, is gathering more and more
credence as evidenced by the moves by The Advertising Research Foundation, American
Association of Advertising Agencies, and Association of National Advertisers to ‘define’ a
‘consumer engagement’ metric (Dwyer, 2007).
The principal enabler of customer engagement is technology, specifically social technologies.
Technology as a term has always led to confusion as to what exactly it constitutes. However,
social media as the ‘group of Internet-based applications that build on the ideological and
technological foundations of Web 2.0 and that allow the creation and exchange of usergenerated content’ (Kaplan and Haenlein 2010) forms an important development for the
customer–firm relationship (Bijmolt et al., 2010). Such technologies include among others
websites, email, social media and networks, discussion forums and blogs. All of these two-way,
interactive channels are highly disruptive for the management of relationships with customers,
and have led to the coining of the term ‘Social CRM’ (Hennig-Thurau et al., 2010).
CRM Technology
Technology has always been vital to CRM implementation, but problems have arisen when the
technology focus has predominated over the marketing focus (Reinartz et al., 2004; Boulding et
al., 2005; Cooper et al., 2008). Effective CRM implementation does not necessarily require
sophisticated analyses, concepts, or technologies (Boulding et al., 2005). What it does require
are technologies that facilitate the underlying marketing and customer-related strategies
(Jayachandran et al., 2005; Ahearne et al., 2007). Two principal areas in which technology can
enable CRM are customer communication and customer information management
(Jayachandran et al., 2005; Harrigan et al., 2010). Whether it has been simple technologies such
as websites, email and databases or more complex CRM packages such as Onyx, the basic aim
has been to build customer insight and use that to better tailor communications to customers,
which in turn will lead to a higher customer lifetime value (CLV) (Dwyer et al., 1987).
The major development of the 21st century, however, has been the widespread availability of
social-type technologies among customers, first on computers but now on smartphones
(Ganesan et al. 2009). These technologies have empowered customers to ‘serve as retailers
themselves on eBay, media producer-directors on YouTube, authors on Wikipedia, and critical
reviewers on Amazon and Tripadvisor’ (Hennig-Thurau et al., 2010:311). Underlying all these
social media are tools such as Facebook and Twitter. If this is where the customers are, then this
is also where CRM also ought to be? The fact that these technologies by their nature possess the
characteristics and capabilities for relationship-building only increases their potential for
successful CRM.
The SME Context
Small and medium-sized enterprises (SMEs) are important components of the economy and,
although they may not carry out marketing like in large organisations, the entrepreneurial
approaches they take are no less important (Connelly et al., 2010; Gilman and Edwards, 2008;
O’Dwyer et al., 2009). The challenges they face are a lack of resources, expertise and impact
(Doole et al., 2006; O’Dwyer et al., 2009). A lack of financial resources limits the ability to grow
(Doern, 2009; O’Dwyer et al., 2009; Xu et al., 2007), and an inability to secure additional sources
of funding exacerbates the problem (Wang and Yao, 2002). Moreover, SMEs tend to lack
management, and in particular, marketing expertise (Carson et al., 1995; O’Dwyer et al., 2009).
Finally, SMEs tend to be particularly susceptible to environmental change where their external
influence is limited (Carson et al., 1995; Jocumsen, 2004; Kocak and Abimbola, 2009).
Thus, SMEs cannot afford or are unable to carry out effective and efficient marketing as
prescribed theoretically. However, in CRM, SMEs have an approach to marketing that
fundamentally represents the way they do business (Harrigan et al., 2011; Slotte-Kock and
Coviello, 2010). CRM, in the case of SMEs, can be defined through two key capabilities;
customer communication and customer information management. Integrating new social media
technologies into these processes can only provide SMEs with significant potential for marketing
proficiency. With regard to integrating social media into customer communication, this
capability becomes customer engagement, which emphasises the two-way nature of interaction
that is permitted.
The characterised weaknesses of SMEs makes it all the more important that they build on their
unique strength and competitive advantage against larger competitors; their close customer
relationships. To do this, SMEs may be able to take advantage of new social media technologies
that can facilitate CRM. This paper builds on previous research by Harrigan et al. (2008, 2009,
2011) who investigated how SMEs integrated more traditional Internet-based technologies into
their CRM activities.
Customer Engagement
Back in 1990, Huber theorized that advanced technologies enable managers to communicate
and stay informed. In 2007, Chen and Ching posited that communication and information are
vital to the success of CRM (Chen and Ching, 2007). Engaging with customers can be seen as an
extension of communicating with customers, made possible through social media.
Customers are participating in social networks, creating and sharing content, communicating
and building relationships with each other (Gordon 2010; Libai et al. 2010). These customer-tocustomer (C2C) interactions are extremely powerful marketing tools, if tapped into in the right
way. There are examples of firms like Blackberry and Apple who have forums that proactively
encourage customer involvement in every stage of the co-creation process. These customers
input into the product and service quality and also become ambassadors for the firm (Hoyer et
al., 2010; van Doorn et al., 2010). However, how processes like this can strategically fit into CRM
remains relatively unknown, particularly in SMEs. In addition, there are challenges in how to
manage such social media processes on a day-to-basis, where for example negative opinions are
aired and spread about the organisation. Unlike previous media, the company cannot be seen to
be controlling the message and suppressing their customers’ voice (van Doorn et al., 2010).
Likewise, the trusting environment that usually exists in the social media prevents firms from
advertising as such, where word-of-mouth spreads more organically based on customer
experiences (Libai et al., 2010).
What is required is a shift in marketing thinking that recognises ‘consumers as highly active
partners, serving as customers as well as producers and retailers, being strongly connected with
a network of other consumers’ (Hennig-Thurau et al., 2010:324). The co-creation of value
becomes a reality (O’Hern and Rindfleisch 2009:4). Thus, it is the level of customer engagement
that drives customer, and indeed firm, value (Kumar et al., 2010)
Information Management
As well as engaging with customers, CRM also requires SMEs to gather, manage and analyse
information on customers (Jayachandran et al., 2005). There has been significant prior research
around the role of information in CRM (e.g. Jayachandran et al., 2005; Chen and Ching, 2007;
Ahearne et al., 2007). This has focused on issues such as profiling and classifying customers,
predicting customer behaviour, conducting target marketing, and cross and up selling into
existing customer base (Chan, 2005). Another major issue identified in previous literature has
been the integration of information from disparate sources (Jayachandran et al., 2005). To sum
up, customer information can be thought of as the ‘engine’ that drives CRM activities.
Just as newer social media have revolutionised communications with customers, so too have
they revolutionised the information processes in CRM. Information on customers now can flow
in real-time, and in significant quantities from sources such as virtual communities, blogs and
social media (Hennig-Thurau et al., 2010). The type of information that exists within these
communities is an invaluable resource for CRM purposes, with real-time customer views,
preferences, buying behaviours and much more (Mathwick et al., 2008; Trusov et al., 2009).
Baker (2009) speculated that the availability of social network data will be as transformative for
the social sciences as Galileo’s telescope had been for the physical sciences (c.f. Libai et al.,
2010:278).
The major theoretical and practical research question posed by these new forms of data is how
can they be tapped in to and utilised for CRM purposes (Hennig-Thurau et al., 2010)? Some
proposed metrics are the aforementioned CLV, but also customer referral value (CRV) which
involves determining how much of each customer’s value stems from his or her referrals of new
customers, customer influencer value (CIV) which is more subtle that referring but involves
influencing through information-sharing, and customer knowledge value (CKV) which involves
indentifying those customers with the best knowledge of the marketplace to help the company
(Kumar et al., 2010). However, these do not deal with the issue of actually gathering the data in
the SME; specifically what social media to monitor and how to gather the data in an effective
and efficient manner. The exponential growth of mobile social media use opens up even more
possibilities for CRM, where location-based marketing is made possible (Hennig-Thurau et al.,
2010; Shankar et al. 2010). Naturally, there is scope for new CRM software packages in this area,
but these are often beyond the scale and scope of SMEs.
Social CRM in SMEs
In extensive previous research, Harrigan et al. (2008, 2009, 2011) uncovered eight
complementary yet distinctive factors that underpinned SMEs’ CRM activities. Factor One was
titled ‘Performance benefits of e-CRM’. The items contained in this factor describe the range of
positive business impacts achievable from e-CRM implementation. Factor two was titled
‘Managing customer information’. The items contained in this factor describe the capabilities of
SMEs, through e-CRM, to acquire and manage customer information. Factor three was titled
‘Adoption of ICT strategy’. The items contained in this factor describe the underlying strategic
approaches to e-CRM implementation. Factor four was titled ‘Performance benefits of
traditional CRM’. The items contained in this factor describe the positive business impacts
achievable from the implementation of traditional CRM. Factor five was titled ‘Perceived
customer value’. The items contained in this factor describe the issue of customer profitability.
In short, does a variation in individual customer value to the firm affect e-CRM implementation?
Factor six was titled ‘Channel conflict issues’. The items contained in this factor describe the
range of challenges incurred to e-CRM implementation, focusing on the issue of face-to-face
communication as opposed to virtual communication. Factor seven was titled ‘Traditional
customer communication’. The items contained in this factor describe the maintenance of
traditional customer relationships by SMEs. Factor eight was titled ‘Impacts of e-communication’.
The items contained in this factor describe the role of electronic customer communication in eCRM.
While this previous research provides a necessary and solid underpinning to CRM in SMEs, the
rise in social media technologies has completely revolutionised CRM as a whole. Thus, further
research is required to investigate the impact of social media on CRM in SMEs. Where social
media have the potential to be relatively low-cost, yet personalised, effective marketing tools,
SMEs cannot afford to ignore these tools as integral parts of their CRM activities.
Research Model
Extending on the resource-based view (RBV) of the firm (Barney, 1991), higher-order
organisational capabilities are suggested as a source of firm performance in the strategic
management literature (Grant, 1996) and more recently in the IS literature (Barua et al., 2004;
Mithas et al., 2005). The rationale behind dynamic capabilities theory is that the RBV has not
adequately explained how and why certain firms have competitive advantage in situations of
rapid and unpredictable change (Eisenhardt and Martin, 2000). In brief, high-velocity markets
are a boundary condition for the RBV (Lengnick-Hall and Wolff, 1999; Priem and Butler, 2001).
As an evolution of the RBV, dynamic capabilities remains an inside-out approach, yet accepts
the influence of outside events (Ferdinand et al., 2004). This notion of market dynamism
encompasses influences such as customers, suppliers, technological advances and industry
norms (Wang and Ahmed, 2007). While allowing for best practice, the existence of common
features among effective dynamic capabilities does not imply that any particular dynamic
capability is exactly alike across firms. It is held that while firm resources may be copied easily,
capabilities are more difficult to replicate because they are often tightly connected to the
history, culture and experience of the firm (Zhang et al., 2008). The concept of dynamic
capabilities is especially relevant within the marketing discipline, and particularly to CRM
(Sambamurthy et al., 2003; Boulding et al., 2005; Coltman, 2007). Information systems research
has applied dynamic capabilities theory to understand the way in which technologies are used
and integrated into organisational processes (Peppard and Ward, 2004; Rai et al., 2006; Coltman,
2007). This research applies dynamic capabilities to CRM as an organizational process.
This research builds on Jayachandran’s (2005) model of CRM published in the Journal of
Marketing, but seeks to apply it to the SME context. It is also updated to place more emphasis
on understanding the role of new social media technologies, within ‘CRM technology use’.
Another construct added to the original model is ‘Customer engagement initiatives’, where
customer engagement is a current phenomenon in marketing facilitated by these new
technologies. See Figure 1 for a conceptual model.
Figure 1
Conceptual Model of CRM
H2
Customer
engagement
initiatives
H1
Customer
relationship
orientation
CRM technology
use
H5
H3
H7
Customer
relationship
performance
H6
Relational
information
processes
H8
H4
Model adapted from Jayachandran et al. (2005), Journal of Marketing
Explaining the model briefly, customer relationship orientation refers to the SME’s focus on
managing customer relationships. CRM technology use refers to the technologies that SMEs use
to facilitate their CRM activities, specifically social media. Customer engagement initiatives refer
to the processes that SMEs undertake to build relationships and interact (or engage) with their
customers. Relational information processes refer to the information acquisition, management
and analysis activities that SMEs undertake to build insight on their customers. Finally, customer
relationship performance refers to the overall marketing-related performance of the SME.
Future Research
A survey instrument is being developed to test the above model. The instrument, although
drawing heavily on Jayachandran’s (2005) scales, required the development of new constructs
and items to measure the social media aspect of the study. This required further literature
reviewing and an ongoing phase of qualitative in-depth interviews with practitioners (Ahearne
et al., 2007). After pre-testing, a final survey will then be distributed to a large sample of servicesector SMEs, with the precise sample yet to be confirmed. However, the service-sector in
general is more suited to a customer relationship orientation (Lovelock, 1983; Eisingerich and
Bell, 2007). We will use structural equations modeling (SEM) as the analytical tool to test the
strength of hypothesized relationships, as specified by researchers (Bollen, 1989).
In conclusion, this conceptual paper is an introduction to a new research investigation of social
CRM in SMEs. The study draws on extensive previous research on CRM in SMEs by Harrigan et al.
(2008, 2009, 2011) and adapts Jayachandran’s (2005) model of CRM to better reflect the impact
of social media. For SMEs, previous research has found that technology can facilitate their CRM
processes. This research aims to explore how new social media technologies may be able to take
their CRM activities to an even higher level.
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