AN EXAMINATION OF THE EFFECTS OF INFORMATION AND COMMUNICATION TECHNOLOGY ON CUSTOMER RELATIONSHIP MANAGEMENT AND CUSTOMER LOCK-IN

By | February 9, 2018
INTRODUCTION

 

Continual advances in information technology (IT) have led to increased use of information and communication technologies (ICT) throughout business organizations. In seeking new opportu- nities, many businesses have turned to advanced ICT to strategically position themselves to com- pete in global electronic marketplaces. With its maturity, ICT has begun playing key roles in the implementation of many modern management concepts, such as business process reengineering (BPR), electronic business (e-business) and commerce (e-commerce), supply chain management (SCM), knowledge management (KM), and customer relationship management (CRM), and con- sequently has defined a new set of rules for competing. However, ICT provides only a short-term advantage. As it becomes readily available, ICT tends to equalize the presence of all competitors.

Hence, businesses must look beyond the mere implementation of ICT and seek competitive ICT- enabled means to maintain their customer base.

In marketing, ICT has enabled businesses to understand and leverage their marketing knowl- edge, and become more customer-centric in their marketing and servicing practices (Roberts 2000). An emerging technology that has assisted them is customer relationship management (CRM) systems. Businesses have adopted CRM as a means to build customer-centric strategies and cre- ate greater customer value by providing the right products and services to the right customer at the right place and time through the right channel to help gain a competitive advantage. The adoption directs the marketing emphasis on retaining existing customers through microsegmented, tailored products. A recent U.S. survey suggests that businesses need to maintain good customer relationships (with their existing customers) to sustain profitability (Li et al. 2001). The Mercer Market Survey (2000) has shown that acquiring a new customer can cost five times more than retaining an existing customer, and a 5 percent increase to the customer retention effort can gen- erate a 60 percent boost in profits. Thus, the shift to customer-centric markets has forced these businesses to establish and build closer learning relationships and interactions with their custom- ers to gain greater insights into their needs. As a result, many businesses have turned to CRM to manage their relationships (Ryals and Knox 2001).

CRM seeks to understand and influence customer behavior through meaningful two-way communication to improve customer acquisition, retention, loyalty, and profitability over time (Berry and Parasuraman 1991; Day 2000; Kohli et al. 2001; Peppers et al. 1999; Swift 2001). A common definition describes CRM as a process that utilizes technology as an enabler to cap- ture, analyze, and disseminate current and prospective customer data to develop deeper and insightful relationships, and identify and more precisely target customer needs. Conceptually, CRM embodies the concepts of relationship marketing (RM). Hence, a CRM system can be seen as an information system to assist the customer retention process or as a methodology that extensively relies on IT, such as Internet applications, to enhance the effectiveness of relation- ship  marketing practices.

However, as in the case of many major applications of ICT, implementing a CRM system looms as a formidable task, and CRM’s benefits, such as improvements to customer service and increases to market share, are not reaped quickly. Underlying issues that bear heavily on its imple- mentation include adopting a compatible marketing strategy and establishing the scope of ICT- enabled systems. Finding a compatible marketing strategy involves strategically leveraging ICT to enhance business growth and focuses on examining ICT leverages from different perspectives, including forming barriers to entry, dedicating organizational resources and firm capabilities, and engaging in time-based competition. Additionally, a number of empirical studies on ICT and business organizations reveal that greater investments in ICT, also referred to as ICT-intensive- ness (ICT-ness), create positive perceived impacts on organizational productivity and customer service quality. Advances in the conceptualization of key elements exhibited by ICT-ness busi- nesses and various CRM conceptual frameworks and key issues have been addressed in the litera- ture. Few studies, however, have empirically tested the impact of ICT on CRM performance and customer lock-in—the willingness of a customer to engage in further transactions.

This chapter examines the effects of ICT on CRM and its impact on customer lock-in effect, and proposes a model of CRM success. It identifies three CRM elements—market orientation, mass customization, and IT investments—and examines their effect on CRM performance, partnership quality, and customer lock-in. In essence, with greater emphasis being placed on the application of technology, does the infusion of ICT influence a business’s ability to  retain its customers?

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