It is the objective of the Advances in Management Information Systems (AMIS) to present our knowledge about the field of Information Systems (IS), but also to be an instrument in the expan- sion and in the deepening of this knowledge. The editors and the authors of the present volume worthily contribute to this goal by focusing our attention on enterprise strategies and information systems that aim to bind firms to their customers.
The expansion of the advancing market economies over the last three centuries has been greatly amplified by the recent accession of the large parts of the world to the market system. These are epochal changes, with their enactments and impacts in statu nascendi. This much is, however, clear: Over the last two decades, the choices and opportunities for the participants in global econo- mies have expanded vastly. The inexorable competitive pressures of the marketplace have in- creased the pace of organizational and technological innovations, and have in turn been driven by these innovations. In particular, the ongoing globalization of the markets has expanded the choices of the buyer, the customer, be that a consumer or a firm.
Information has always been the lifeblood of the marketplaces. Computerized information systems of the last half-century have enabled new organizational forms, with the constellations of firms delivering their products as a virtual company, and with process specialists (think FedEx) emerging to serve across industries and across nation-states. Most products in today’s market- places are either information-based, or are a part of package involving a physical good, informa- tion, and (information-based) service. Consider a customized computer system delivered by Dell, an electronic airline ticket priced by a yield-management system, or a slot machine that recog- nizes the returning customers and adjusts the game on offer to their inferred preferences. The total augmented product is far more responsive to the marketplace and to the customer than in the past.
The Internet-Web compound that is enabling—when not driving—this transformation today is certainly not the culmination of the change process. It is as certainly a major technological discontinuity, opening the world to transformative technologies, and submitting these technolo- gies to the transformation attendant on their adoption in diverse contexts, all enacting their forces of change. With multiple options available to the customers in market economies, the competi- tion for best customers becomes an engine of economic growth. The competition for customers occurs at the firm level (however, assisted-or hampered-may it be by governments). Firms need to focus all their activities on profitably serving their customers. This means, in turn, being able to continually identify, reach, and satisfy the customers with long-term profitability. Customer Re- lationship Management (CRM) is the strategy with precisely that aim.
A multifaceted effort, CRM has been defined in many ways, a number of them valid. We may consider CRM to be a business strategy to acquire and manage relationships with customers in order to maximize the long-term value of these relationships. Basically, the firm implementing
CRM aims to increase the loyalty of profitable customers and to increase the profitability of loyal customers. This is the point of view of the owner firm. In the customer’s perception, an effective CRM program means that the firm satisfies the customer more completely than any competing supplier could. This engenders loyalty. Indeed, the foundational premise of CRM is the high level of financial return on customer loyalty. Customer equity is a crucial endowment of a firm (Rust, Zeithaml, and Lemon, 2000). Selecting and acquiring customers based on their lifetime value results in higher profits than seeking out customers based on other criteria (Venkatesan and Kumar, 2004). Metrics are available to actually project this return (Pfeifer and Farris, 2004). CRM is a significant development in the shift of the business and marketing orientation from the product focus (marketing the products) to the customer focus (satisfying or exceeding customer require- ments over a long horizon of the relationship).
The immediately obvious aspects of CRM have then to be these: an integrated view of the customer and the customer’s dealings with the firm; the primacy of the long, relational attitude toward the customer over the short-sighted, transactional view; increasingly more refined indi- vidualized approach to a customer over the span of the relationship; knowledge of the projected value of the existing customers to the firm over the long term; and a large degree of knowledge of non-customers and of what separates some of them from becoming desirable customers. This brief analysis of CRM tells us that the strategy is impossible without advanced and integrated information systems, centering on data warehouses for the longitudinal analysis of the total view of the customers and on integrated databases for the delivery of service to them. This is, of course, not enough. The organizational transformation into customer-focused culture, customer-oriented business processes, the customer-centric performance metrics, new incentive systems deriving from creating lasting customer relationships, are all necessary components of CRM. Such compa- nies as Southwest Airlines come to mind.
Indeed, relationship marketing, the underlying premise of CRM, cannot be effective without an appropriate use of information technology (IT) (Zineldin, 2000). Today, customers are reached via multiple channels, integrating the Internet-based touch points of the Web and email, delivered also over mobile devices, with the direct marketing and brick-and-mortar-based sales. It is neces- sary to sustain consistent, unified interaction with the customer across all the touch points, from the Web to the store, and across all the company’s units interacting with the customer, from sales to service (Pan and Lee, 2003). Moreover, integrated collaboration with channel partners such as distributors and retailers is necessary for a producer. Each interaction with the customer, be it a sale or a well-handled customer complaint, ought to have a positive effect on the relationship. As e-commerce becomes increasingly embedded in the physical world, we can no longer treat the Internet-Web based touch points in isolation (Zwass, 2002).