9 - CRM and Profitability
9 - CRM and Profitability
4, 2011
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Role of CRM in Profitability of Service Organizations: A Case of a Leading Telecommunication Company in Bangladesh
Mohammad Mizenur Rahaman (Corresponding Author) Assistant Professor Department of Business Administration Shahjalal University of Science and Technology Sylhet -3114, Bangladesh E-mail: mizen.ban.sust@gmail.com Alternative E-mail: mizen_397@yahoo.com Cell: +8801716258962, +8801818970170 Mohammad Imtiaz Ferdous Assistant Professor Department of Business Administration Shahjalal University of Science and Technology, Sylhet -3114, Bangladesh E-mail: imti1975@yahoo.com Md. Zillur Rahman Assistant Professor Department of Business Administration Shahjalal University of Science and Technology, Sylhet -3114, Bangladesh E-mail: fuaddu@yahoo.com Cell: +8801716609814
Abstract Realizing the importance of Customer Relationship Management (CRM) systems to increase profitability almost every organization regardless of their size are increasingly adopting CRM systems. Firms use CRM systems not only to automate customer oriented business processes to reduce costs, but also to collect and analyze customer data to better fulfill customer needs and improve customer satisfaction. Telecommunication business in Bangladesh is in a growth stage with stiff competition and making an enormous profit every year. Most of the companies are using CRM. In this study, we have attempted to identify level of application of CRM in leading Telecommunication Company in Bangladesh considering developing model of CRM. Paper will also reveal how important is the CRM strategy of Grameen Phone (GP) Ltd., a leading telecommunication company in Bangladesh contributes in changing Return on Assets (ROA), Return of Equity (ROE) of the company in the stiff competitive market. Keywords: CRM Strategy, ROA, ROE, Cost effectiveness 1. Introduction: Customer Relationship Management (CRM) is a business strategy that enables organizations to get closer to their customers, to better serve their needs, improve customer service, enhance customer satisfaction and thereby maximize customer loyalty and retention. The present business scenario assigns great emphasis to managing business customers. Organizations are quickly recognizing that in order to survive competition, it is important to grab customer attention with unique brand identity and superior service levels. Businesses, which initially focused on finance, sales and marketing management, are now shifting their priority towards customer
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relationship management. CRM solutions are flooding the market with easy-to-use tools to manage business customers. The globalized world is changing very fast. Information and communication technology plays an imperative role in this change. As business conditions continually change, mid-market enterprises are forced to constantly realign their business strategy to maintain profitability and growth (Rashid and Rahaman, 2009). CRM is a process or methodology used to learn more about customers' needs and behaviors in order to develop stronger relationships with them. It helps businesses to use technology and human resources to gain insight into the behavior of customers and the value of those customers. CRM systems are enterprise applications that manage business interactions with customers through integrating customer-oriented business processes, including marketing, sales, and customer services (Gefen and Ridings 2002; Karimi et al. 2001). Leveraging CRM systems requires both IT and business managers to have sufficient technical and business skills for carrying out CRM-enhanced operations (Goodhue et al. 2002). So, application of CRM in all types of organization is obligatory, and for service sector firms it is predominant. 2. Literature Review: CRM has been described, defined and conceptualized in several ways, reflecting a variety of viewpoints of different authors. Some have defined it as a process; others as a strategy, a philosophy, a capability, or as a technological tool (Zablah et al., 2004). However, it has become clear that CRM is definitely more than just technology (Dimitriadis and Stevens, 2008). While technology is a key enabler, it is only a means to the end and most authors view CRM as a combination of strategy and information systems focusing companys attention on customers in order to serve them better (Chan, 2005). CRM systems and technologies offer multiple opportunities to deal with service characteristics like intangibility, inseparability, heterogeneity and perishability (Parasuraman et. al., 1985). First, specifically for servicing rms having an important dematerialized part of offering, like airlines companies, hotels or banks, CRM is expected to multiply opportunities for delivering information to customers, providing offerings and answers to complains (Willcocks and Plant, 2001). Second, CRM is expected to contribute to existing or new relationships. As services are delivered through processes, their use is very often dissociated from the purchasing process. Finally, CRM is expected to reduce the transaction costs by adapting the interaction to the kind of answer expected by the client. Consequently, the pivotal role of CRM systems in increasing loyalty of profitable customers and give importance for most of services companies (Claycomb and Martin, 2002). Boulding et al. (2005) suggested a broad definition of CRM as the outcome of the continuing evolution and integration of marketing ideas and newly available data, technologies, and organizational forms. Not only does CRM build relationships and use systems to collect and analyze data, but it also includes the integration of all these activities across the firms, linking these activities to both firms and customer value, extending this integration along the value chain, and developing the capability of integrating these activities across the network of firms that collaborate to generate customer value, while creating shareholder value for the firm. Service is considered a process aimed at creating value in use for customers, the first important step is to find tools for mapping it in such a way that it enables the inclusion of the context, the customers perception of the relationship (Dong and Zhu, 2004; Rigby et. al., 2002). It has been suggested that service could be seen as a process, as an activity, as deeds and interactions (Lovelock, 1991; Solomon etal., 1985; Zeithaml and Bitner, 2003). 3. Objectives of the study: The main objective of the study is to identify the role of CRM in service organizations focused on the telecommunication industry in Bangladesh. Other objectives are:
4.
to analyze the profitability of the organization; to analyze the growth of mobile phone users in Bangladesh today; to analyze the present CRM practices of cell phone companies mainly the GP in Bangladesh; and to recommend some action plan for CRM productivity in the telecommunication industry. Methodology of the Study:
Research methodology of the study was followed on qualitative as well as quantitative research. Case study approach, observations, in-depth interview, and survey study were used as research techniques. The available literature used through reviewing different articles, books, periodicals, journals, etc., and relevant websites. Primary data were obtained through a sample survey conducted on 400 GP cell phone users and 200 officers at different levels of Grameen phone all over the country. Interviews were conducted by a semi-structured
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questionnaire. Sources of significant secondary information included the sales data, newspapers, publications of GP. Random sampling technique was applied for the data collection purpose and Likert scale, Karl pearsonian correlation, ratio analysis were used to data analysis.
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satisfaction. At present six mobile operators work in the industry with 74.18 million subscribers, several market surveys forecast the number of mobile phone users will be around 80 million at the end of 2011.
Table 1: The Mobile Phone subscribers of different operators (at April, 2011): Operators Grameen Phone Ltd. (GP) Orascom Telecom Bangladesh Limited (Banglalink) Robi Axiata Limited (Robi) Airtel Bangladesh Limited (Airtel) Pacific Bangladesh Telecom Limited (Citycell) Teletalk Bangladesh Ltd. (Teletalk) Total Source: website of BTRC ( www.btrc.gov.bd) Table 2: Public switch telephone networks (PSTN) Phone Subscribers at May 2010: Operators BTCL Telebarta Ltd. Jalalabad Telecom Ltd. Onetel Communication Ltd. Westec Ltd. Sheba Phone Ltd. (ISL) S. A. Telecom System Ltd. Banglaphone Ltd. Total Subscribers 872.41 56.42 10.90 39.57 17.00 11.62 18.03 2.24 1028.19 Active Subscribers in Millions 32.640 20.049 13.794 4.782 1.747 1.174 74.188
Source: website of BTRC ( www.btrc.gov.bd) In the initial stage, most of the companies were not applying CRM system but now all of the mobile phone companies apply CRM systems in their organizations. GP apply CRM system for customer management and service management.
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Customer Service Hotline : User of the GP will get service by dialing 121 from their own mobile set. Customer Service Point :
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User of the GP can solve the problem just knocking at the door of their near customer care center with valid documents of SIM holder. Complaint Management: Complaint Management handling queries, requests by mail, faxes and letters from customers. Feedback Form/Query Form : Customers can ask a question about their unknown facts through their website and will get instant answer by the CRM systems of the company.
7.2 GP is the leading operator in Bangladesh for customer caring and billing system:
CRM technique of GP already ensures customer loyalty with end-to-end customer care by direct text message, voice mail, and direct call to the subscribers. Auto generated messages of the CRM systems help to subscribers to understand many unknown facts. The System provides auto voice messages to the caller before making a new call when below the minimum balance and make a bill (for post paid subscriber) of the individual subscriber by showing every call with call duration, cost, time, and date from the databases of the CRM system.
Grameenphone celebrates the eve of Bengali New Year by offering all the subscribers special shopping discounts at different partner outlets like: Code 1196 Category Food Special Discount 10% & 7% Region Barisal
Table 4: Subscribers special shopping discounts at different partner outlets of GP: Thank You partner Dhansiri Restora
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New Mela Jilanee Bastralaya & Cosmetics Charka Olympia Palace Jolly Bee Fashion Hut World Fashion Grill House and Restaurant Mens Park Meah Bibi AFC Food Shoilpik Fresh and Wild Probarton Ongona Nexus Fashion World Rainbow Chinese Restaurant Source: www.grameenphone.com All types of partner relationship are performed through CRM systems of Grameen Phone. 1136 1134 1099 1122 1124 1041 1116 1043 1148 1273 1151 1080 1240 1088 1141 1220 1286 Fashion Fashion Fashion Food Food Fashion Fashion Food Fashion Fashion Food Fashion Fast Food Fashion Fashion Fashion Food 10% 15% 15% 12% 10% 15% 10% 15% 7% 7% 10% 5% 13% 10% 10% 12% 10%
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Barisal Barisal Dhaka Dhaka Dhaka Khulna Khulna Khulna Chittagong Chittagong Chittagong Chittagong Rajshahi Sylhet Sylhet Sylhet Sylhet
Success of any organization mainly depends on level of customer interactions, which is main part of the CRM. Cycle starts from receiving customer information while cycle end at keeping customers information and retain them successfully. Following model describe how customer interaction cycle will be performed.
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1216 76 3
(Source: Appendix -01) Table: 07 Average Score table of Survey results Dimensions of TRACK model Interviewee GP's Officer 3.2 Customers 2.78 2.8325 2.855 3.125 3.04 2.9265 3.365 3.145 3.455 3.16 3.265 Thankful Responsiveness & Relationship Appropriate Caring Keep in touch Average CRM Score
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Deviation 0.42 (Source: Appendix -01) 10. Trend of Subscriber in Grameen Phone: 0.5325 0.29 0.33 0.12
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0.3385
From the survey result it is evident that customers are satisfied with services, customer caring, billing systems of the Grameen Phone though the tariff structure is high in comparison to other operators in Bangladesh. The Survey results also help us to understand that integrated CRM application of GP tries to ensure efficiency and customer loyalty of the organization. The table 10 shows the upward trend of GPs subscriber numbers. Table 08: Subscribers of Different operators: Operators Grameen Phone Ltd. (GP) Orascom Telecom Bangladesh Limited (Banglalink) Robi Axiata Limited (Robi) Airtel Bangladesh Limited (Airtel) Pacific Bangladesh Telecom Limited (Citycell) Teletalk Bangladesh Ltd. (Teletalk) Total 11. Nov. 2011 28.843 18.843 12.059 3.797 1.873 1.204 66.621 Dec. 2011 29.970 19.327 12.368 3.956 1.811 1.211 68.645 Jan. 2011 30.428 20.038 12.626 4.184 1.858 1.204 70.340 Feb. 2011 31.143 20.178 12.805 4.371 1.792 1.216 71.51 March 2011 31.98 20.126 13.259 4.607 1.787 1.198 72.963 (in million) April 2011 32.640 20.049 13.794 4.782 1.747 1.174 74.19 Growth % (Nov. to April) 13.16 6.40 14.38 25.94 -6.72 -2.49 11.36
Source: website of BTRC ( www.btrc.org.bd) Financial performance of GP: GP is the leading telecom company in Bangladesh in terms of its financial performance. The earning per share of GP is the highest in the industry. Even the companys growth is higher than average growth in the industry (Table 11). Table 09: Financial performance of the company Particulars Revenues Operating Profits Assets Equity Net Profit Margin Return on Assets Return on Equity Earning per share Dividend Pay out Ratio 2007 54,303 16,767 88,461 26,111 6% 3.9% 12.1% 2.52 49% 2008 61,359 15,350 108,194 27,588 5% 3.0% 11.1% 2.46 53% 65,300 30,518 109,162 50,154 23% 13.8% 38.5% 12.08 54% (in million BDT) 2009 2010 74,733 20,207 109,502 44,032 14% 10% 22% 7.93 151%
In this organization tariff structure reduced about more than 60%. Source: Annual report of GP, 2010 The company increased its revenue, operating profits and achieved above standard ROA, ROE, EPS and declared a dividend of 49% in the 2007. By applying Karl Pearson correlations we found R (assets, profits) = .83 which is a positive relationship between Return and Assets, while R(Equity, profits) = .93 which is a highly positive relationship
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between Return and Equity and R(Assets, Turnover.
Turnover) =
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12. Future Implementation and action plans of CRM systems in the Telecommunication industry: Leveraging CRM systems requires both IT and business managers to have sufficient technical and business skills for carrying out CRM-enhanced operations (Goodhue et al. 2002). More importantly, successful CRM implementation often entails significant organizational transformation due to the complexity of multiple operations involved in managing customer relationships (Karimi et al. 2001). Implementing a CRM system is only part of the needed change. To embrace the new ways of interacting with customers, firms need to align various organizational aspects with their CRM systems, e.g. business processes, strategies, top management support, and employee training (Goodhue et al. 2002). These organizational efforts are termed organizational capital and must take place in conjunction with technology investments (Bryjolfsson et al. 2002). GP applies CRM in every aspect of their operation and management. Though their tariff cost is high compared with other operators in Bangladesh, customers are loyal to them only for better caring, servicing and management. At the same time GPs CRM system assists them to effectively analyze sales and marketing data for ensuring competitive advantage that is why they are the leader in the industry to date. As the telecommunication industry is the purely a service sector, its success completely depends on customer satisfaction and loyalty. However, management of an enormous number of customers is not an easy task. CRM plays a role to better manage customers, services, sales, and operations in the organization. Grameen phone is an excellent example which has held its leadership in this sector from inception. The other five operators are struggling to cut market share from GP by offering more than 50% reduced tariff in all types of outgoing calls. Now the other operators are also trying to implement proper CRM following the success of GP. References: Boulding, W., Staelin, R., Ehret, M. and Johnston, W.J. (2005), A customer relationship management roadmap: what is known, potential pitfalls, and where to go, Journal of Marketing, Emerald group publishing, 69:155-66. Brynjolfsson, E. L.M. Hitt, and S. Yang. (2002). Intangible assets: Computers and organizational capital. Brookings Papers on Economic Activity, 1:137-198. Chan, J.O. (2005), Toward a unified view of customer relationship management, The Journal of American Academy of Business, March: 32-8. Claycomb, C. and Martin, C. (2002), Building customer relationships: an inventory of service providersobjectives and practices, The Journal of Services Marketing, 16 (7): 615. Dimitriadis S. and Stevens E (2008), Integrated customer relationship management for service activities, Managing Service Quality, 18(5):496-511. Dong S. and Zhu K.(2004), The Business Value of CRM Systems: Productivity, Profitability, and Time Lag University of California, Irvine on line journal. Gefen, D., and C.M. Ridings (2002), Implementation team responsiveness and user evaluation of customer relationship management: A quasi-experimental design study of social exchange theory. Journal of Management Information Systems, 19(1): 47-69. Goodhue, D.L., B.H. Wixom, and H.J. Watson (2002), Realizing business benefits through CRM: Hitting the right target in the right way. MIS Quarterly Executive, 1(2):79-94. http://www.grameenphone.com/about-us/media-center/press-release/2009 (visit date: August 2009) http://www.btrc.gov.bd/newsandevents/mobile_phone_subscribers.php (visit date: 25th may 2011) http://www.btrc.gov.bd/newsandevents/pstn_phone_subscribers.php (visit date: 25th may 2011) Karimi, J., T.M. Somers, and Y.P. Gupta. 2001. Impact of information technology management practices on customer service, Journal of Management Information Systems, 17(4): 125-158. Lovelock, C. (1991), Services Marketing, Prentice Hall, Englewood Cliffs, NJ. Lovelock, C. and Gummesson, E. (2004), Whither services marketing? In search of a new paradigm and fresh perspectives, Journal of Service Research, 7(1): 20-41.
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Parasuraman, A., Zeithaml, V.A. and Berry, L.L. (1985), A conceptual model of service quality and its implications for further research, Journal of Marketing, 49: 41-50. Phelps G.R. (2004), Customer Relationship Management, How to turn a god business into a great one, First South Asian Edition, Viva Books Private Limited, New Delhi. Rashid, H. & Rahaman, M.M. (2009), Customer Relationship Management in practice: A Study on Garments Manufacturing Industries in Bangladesh, Bangladesh Journal of Management Information Systems, 1(1): 15-30. Rigby, D.K., F.F. Reichheld, and P. Schefter (2002), Avoid the four perils of CRM, Harvard Business Review, 80(2): 101-109. Solomon, M.R., Surprenant, C.F., Czepiel, J.A. and Gutman, E.G. (1985), A role theory perspective on dyadic interactions: the service encounter, Journal of Marketing, 49(1): 99-111. Willcocks, L.P. and Plant, R. (2001), Getting from bricks to clicks, Sloan Management Review, Spring, pp. 509. Zablah, A.R., Bellenger, D.N. and Johnston, W.J. (2004), Customer relationship management implementation gaps, Journal of Personal Selling & Sales Management, XXIV(4): 279-95. Zeithaml, V. and Bitner, M.J. (2003), Services Marketing, Integrating Customer Focus across the Firm, McGraw-Hill, New York, NY. Annual Report (2007-2010), Grameen phone Bd. Ltd. Appendix: 01 Dimension - 1: Thankful Response of Service providers ( Officers of GP) Rating Excellent Very Good Good Not Good Worst 4 3 2 1 0 Total Rating Excellent Very Good Good Not Good Worst Dimension - 2: Responsiveness & Relationship 4 3 2 1 0 Total Rating Excellent Very Good Good Not Good Worst 4 3 2 1 0 Total No. of Respondent 67 106 27 0 0 200 No. of Respondent 45 227 123 5 0 400 No. of Respondent 87 103 6 4 0 200 Score 268 318 54 0 0 640 Score 180 681 246 5 0 1112 Score 348 309 12 4 0 673
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Rating Excellent Very Good Good Not Good Worst Dimension - 3: Appropriate 4 3 2 1 0 Total Rating Excellent Very Good Good Not Good Worst 4 3 2 1 0 Total Rating Excellent Very Good Good Not Good Worst Dimension - 4: Caring 4 3 2 1 0 Total Rating Excellent Very Good Good Not Good Worst 4 3 2 1 0 Total Rating Excellent Very Good Good Not Good Worst Dimension - 5: Keep in Touch 4 3 2 1 0 Total Rating Excellent 4 No. of Respondent 69 198 130 3 0 400 No. of Respondent 57 120 18 5 0 200 No. of Respondent 52 256 77 12 3 400 No. of Respondent 111 69 20 0 0 200 No. of Respondent 123 225 35 13 4 400 No. of Respondent 72
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Score 276 594 260 3 0 1133 Score 228 360 36 5 0 629 Score 208 768 154 12 0 1142 Score 444 207 40 0 0 691 Score 492 675 70 13 0 1250 Score 288
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Very Good Good Not Good Worst 3 2 1 0 Total Rating Excellent Very Good Good Not Good Worst 4 3 2 1 0 Total No. of Respondent 98 232 58 12 0 400 98 20 10 0 200
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