CRM Systems in Industrial Companies

Intra- and Inter-Organizational Effects

A. Perna, E. Baraldi

• Publisher: Palgrave Macmillan
• Year: 2014
• ISBN:
  9781137335661
• Topic: Business
• Subtopic: Management
• Index: Business

CRM Systems in Industrial Companies contributes new knowledge on Customer Relationship Management (CRM) in the field of industrial marketing. Based on an in-depth case study, this book highlights the complexity and challenges in the development, implementation and use of CRM, revealing how truly challenging it is to extract value from CRM systems.

1

Introduction: Research Purpose, Methodology and Contribution

This introductory chapter starts by defining our research context (B2B relationships and CRM) and our research purpose (Section 1.1). Then, we briefly introduce our theoretical frame and more specific research questions (Section 1.2). We also provide details of the methodology behind our study (Section 1.3) and position it by specifying our contribution (Section 1.4). We conclude the chapter by presenting the outline of the rest of the book (Section 1.5).

1.1 Research context and purpose

For companies operating in business-to-business (B2B) markets, customers represent the most important asset (Corey, 1976; Ford et al., 2006). However, there are many aspects that make these relationships hard to forecast and manage. Since the 1970s Industrial Marketing and Purchasing (IMP) scholars have investigated interactions and relationships between sellers and buyers in industrial market settings, stressing the possibilities and challenges in managing customer relationships. Since the 1990s there has been a parallel upsurge in the practice and theory of Customer Relationship Management (CRM), which encompasses a philosophy, strategies, processes, methods and Information Technology (IT) tools for managing customer relationships. However, CRM entails so many dimensions that its conceptualization is still rather vague and appears today as a buzzword applied to designate quite disparate things, still objects of extensive debate (Payne and Frow, 2005; Zablah et al., 2004). There is also an ongoing debate in the literature about the challenges (Bull, 2003) and the benefits for companies implementing CRM (Landry et al., 2005; Campbell, 2003). This book aims to contribute new knowledge at the intersection between the two phenomena and research fields above, namely knowledge about CRM as applied in the context of industrial marketing and buyer–seller relationships.

The actual effects and value of CRM in helping companies to better manage customer relationships are widely discussed by both academicians and practitioners. Some intriguing questions concerning CRM are: should we consider CRM as a misleading or a successful approach? If the core ideas are valuable in principle, does it mean that all problems reside in the way CRM is concretely implemented? Evidence of failed CRM projects abounds, which triggers the question of why so many companies still struggle with it. Not surprisingly, many books and articles label CRM as a fascinating but challenging phenomenon. Indeed, starting in the 1990s, the academic literature has assumed two distinct positions about CRM and its value: either as an opportunity or as a source of problems.

The positive voices about CRM stress that it can improve customer-service reliability and service monitoring (Berkley and Gupta, 1994), that it helps companies to manage valuable information (Mithas et al., 2005) and that it can provide customized products to the market (Rigby et al., 2002). Critics stress that employee resistance is a risk associated with CRM implementation (Xu et al., 2005) and that CRM negatively impacts on the freedom of employees in carrying out their daily activities. Another type of critique is that CRM often is merely utilized to categorize customers into segments, thereby failing to be the useful tool that companies wish to have (Fournier and Avery, 2011). Many problems in CRM implementation and adoption are not of a technical nature but are closely linked to organizational changes (Schwartz et al., 2002). Lack of capabilities and commitment of firms when managing CRM projects has been pinpointed as one of the main reasons for the failure of many CRM projects.

Against this background, we aim to contribute to the academic debate on CRM by assuming a balanced position when investigating CRM, in the sense that we aim to highlight both the opportunities and the limitations of CRM as a tool for managing customer relationships. In other words, our study recognizes CRM as a potentially valuable tool for companies even though its value will depend on how it interacts with other resources surrounding it. Being balanced also means recognizing that CRM might produce both positive and negative effects which are not defined unilaterally by it: the effects of CRM will depend on a blurred and complex set of technical and social mechanisms of interaction.

We also aim to contribute to the debate on CRM systems by investigating the actual process behind their development, implementation, embedding and use (cf. Van de Ven et al., 1999). Our standpoint is that it is inappropriate to investigate CRM by assuming that organizations will gain advantages by simply following a trustworthy recipe for implementation. The implementation of CRM systems and their broad consequences have to be investigated by considering the complexity of this process. Introducing CRM into an organization will lead to effects that are closely dependent on how CRM interacts with other relevant resources. Therefore, the purpose of this book is to investigate, on the one hand, the intra-organizational effects derived from embedding a CRM system inside a B2B firm, and, on the other hand, the inter-organizational effects on the firm’s customer relationships.

More precisely, this study is concerned with understanding how a focal CRM system is constructed and embedded in a using company operating on an industrial market and what contribution it makes to managing customer relationships, viewed from the perspective of the supplier. Thereafter, this book analyzes the effects of CRM at two levels: (1) the intra-organizational effects derived from embedding a CRM system inside the organization that installed and uses it; and (2) the inter-organizational effects on the firm’s customer relationships, including how CRM impacts the process of managing these relationships.

1.2 Theoretical frame and research questions

Our theoretical frame is based on the IMP perspective, because it allows us to deal with the two pillars of this research: customer relationship and IT systems (namely CRM) in a B2B setting. As our research purpose is to analyze the use and effects of a CRM system, that is, an IT tool applied for CRM, we need to understand both the embedding of CRM in the using company and the effects it produces on the company’s customer relationships. Therefore, we adopt as a main part of our theoretical framework (see Chapter 2) the IMP perspective on buyer–seller relationships (Håkansson, 1982; Ford, 1990; Håkansson and Snehota, 1995; Håkansson et al., 2009; Ford et al., 2011).

Moreover, the IMP perspective is suitable also for building our alternative view about CRM. We need an alternative definition of CRM for at least one important reason: CRM is not a monolithic and deterministic IT tool that can automatically produce its effects, but needs to be connected with other resources before it can produce any effect (Baraldi and Waluszewski, 2005). In this vein, CRM is simply a resource to be combined with others, such as other IT tools, individuals and organizational units. Most importantly, the value and contribution of CRM will depend on those resource combinations (Baraldi, 2003). In order to investigate how companies develop and embed CRM, we need accordingly to analyze the patterns of resource interactions around CRM, which requires in turn an analytical tool capable of capturing how resources are combined and interfaced. The analytical tool that we will employ for this purpose is the so-called 4Rs model (Håkansson and Waluszewski, 2002), which categorizes resources into four basic types and analyzes their interactions as well as their interfaces (see Chapter 5).

Relying on the 4Rs model, CRM can be viewed as a facility that interacts with users who insert data inside it to receive back processed information which they can use for managing customer relationships (Baraldi et al., 2013). This conceptualization of CRM highlights the process of resource interaction behind CRM. Based on this theoretical background, the two questions that will drive our analysis are:

1) How does CRM become embedded within the using organization?

2) What are the effects of CRM embedding at both intra- and inter-organizational level?

1.3 Methodology

This study features the main data collected and the key results obtained over a period of three years within a PhD project by means of direct participation by one of the authors in the implementation as well as utilization of a CRM system in an Italian industrial company, the Loccioni Group. Therefore, the bulk of this study has been carried out by performing action research, which is characterized by active participation of the researchers in the organizations being observed, as well as by the use of multiple data gathering sources (Coughlan and Coghlan, 2002).

The book is based on a single longitudinal case study approach (Yin, 1994), which fits the exploratory nature of this research and allows examination of the complex nature of the phenomenon under investigation, that is, how CRM affects companies during its development, implementation, embedding and using. Case studies are useful tools when investigating a complex and context-specific phenomenon (Easton, 2010) and are a means to better understand change processes, as they allow for the examination of heterogeneous factors (Halinen and Törnroos, 2005). We selected our case study due to its rich variety of factors intervening in the phenomenon at hand, and accordingly for the learning potential it offers (Dubois and Gadde, 2002).

This complexity prompts a qualitative in-depth case methodology, which is a fruitful strategy when the focus is on a contemporary phenomenon (Eisenhardt, 1989) related to a real-life context. This method also allows following changes over time so as to examine problems and challenges surrounding the implementation of CRM. In fact, this case study was conducted both in real time and as a “follow up” study (Halinen and Törnroos, 2005): this means that we followed the events as they unfolded and collected data both during the course of these events and “a posteriori”, conducting an indirect way of capturing data (Dubè and Parè, 2003).

We collected data with the explicit aim of identifying first the original conditions and goals of Loccioni and then the key aspects of the emerging CRM system. Our data accordingly covers early events in the process of implementation of CRM and enabled us to better understand the unexpected impact of CRM on Loccioni’s overall organization. The data were collected in Italy between 2005 and 2008 by means of various different techniques and in different phases of our research. Data collection was based upon internal surveys, face-to-face interviews and direct participant observation in the CRM implementation project.

Two different surveys were arranged and administered via a questionnaire addressed to the users of the CRM system. The specific topics of the first survey dealt with the following: (1) understanding employees’ propensity to use IT tools for managing sales and marketing information; and (2) defining employees’ specific needs when using IT to manage business relationships. The second survey was aimed at measuring the effects of the CRM system for its users and also on a sample of relevant customer relationships.

Semi-structured interviews were also conducted, ranging from one to several hours. The respondents included personnel from several levels of Loccioni’s organization: these include Loccioni’s CEO, sales managers, Key Account Managers (KAMs), the marketing and communication manager and after-sales manager, who were all informed of the research purpose prior to the interview. In order to capture the dynamic aspects of CRM embedding, these interviews focused on a few central themes: the need for and the development of CRM, as well as the characteristics of the specific CRM system being introduced; the development and management of some key customer relationships, which we deemed as useful for understanding the inter-organizational impact of CRM; the assessment of CRM in terms of benefits for the users, and even more concretely the problems that were afflicting the CRM system at Loccioni a few months after it had been installed.

As for the direct observations, one of the authors was allowed to participate personally in the entire CRM project at Loccioni, where he was an active member of the project team as well as an active user of the CRM system, by carrying out marketing activities on it. In this way, this researcher could also participate in basically all key meetings: all these direct participant observations provided us with a thorough insight into the case.

Turning to the analysis, the empirical data was first transformed into a description of the case story, which allowed us to identify the timeline of the phenomenon under investigation as well as important events in this process. When we realized that the case study was an interesting example of the implementation, use and effects of a specific type of CRM tool, we decided to focus on the resource layer of the business network concerned and accordingly chose to apply the 4Rs model for further analysis of the empirical material (Wedin, 2001; Baraldi and Bocconcelli, 2001; Håkansson and Waluszewski, 2002). We searched in our data in order to address two main issues: (1) the features of the technical and organizational resources involved in the embedding of the CRM system at hand (e.g., software, organizational units); and (2) the connections and the interfaces between the resources involved (at both technical and organizational level). Then, we mapped out the resource network around the focal resource, that is, the CRM system. After having also defined the structural details of the network, we returned to our timeline and were able to divide the case story into different periods by referring to critical episodes that were now also considered the key resources involved: for instance, project team building, CRM testing and CRM launch. To sum up, thanks to our method that combines participant observation and action research (Levin and Greenwood, 2001), this book can provide a vivid illustration of the process of CRM implementation and use.

1.4 Contributions and positioning

The embedding and the effects of CRM on organizations are important but highly complex phenomena. This book identifies several sources of such complexity. First, when companies implement CRM, they do not deal with a linear and predictable process; rather, CRM implies a set of obstacles that are often hidden or ambiguous, but which need nonetheless to be taken into account. Second, it is still unclear what the actual contribution of CRM to relationship management is, as witnessed by the many failures in CRM implementation. One additional problem here may be the lack of a commonly accepted definition and framework of CRM, which creates confusion among academicians and practitioners alike. Third, CRM involves many different dimensions (resources, we could say), such as IT tools (software, hardware and IT architectures), individual users and organizational structures: implementing and using CRM systems often involves trade-offs between these dimensions, which have to be addressed in order to push the embedding process ahead. It is important to find a balance between all these dimensions of CRM, at least for the sake of reducing the level of conflicts, tensions and problems among them. Finding a balance requires a fine-grained approach that penetrates and reorganizes the resource combinations that embed CRM.

This book provides several contributions, which are tightly connected with each other. The main contribution of this work relies both on the theoretical concepts and on the evidence from the case study, and consists of four dimensions that we propose can frame whether and how CRM affects customer relationships (see Chapter 9). Two of these dimensions are basic characteristics of the customer relationship itself, namely its history/start date and its level of complexity. The third dimension is a characteristic of CRM users, namely the age of the KAM, which indicates the CRM user’s willingness to use and attitude toward using IT tools in performing their managerial tasks. The fourth dimension is finally the matching of users’ informational needs in performing their managerial tasks: this is a more complex and somehow hidden dimension as it combines several resources simultaneously (the IT tool, the users, their specific needs and managerial tasks). Clearly, these four dimensions can be considered as relevant also from a managerial perspective.

Many valuable books published in recent years about CRM do define CRM, stress its (potential) advantages and contributions, and some even describe the process of introducing and using CRM. However, these books do not provide the reader with a detailed analysis of the challenges, conditions and dimensions affecting CRM implementation, use and effects that we have outlined above. Therefore, our research makes an effort to highlight these issues, including probing into the effects of CRM on customer relationships, supported empirically by an extensive case study. Finally, since the book analyzes both intra- and inter-organizational effects of CRM, it also contributes to research within industrial marketing and network studies. More precisely, this study is an application of the IMP-related “resource interaction” perspective to analyze the implementation of CRM and the effects derived from its utilization.

In comparison to other research on CRM, predominantly made in consumer marketing settings, this book contributes new knowledge on CRM as applied in the field of industrial marketing, and more precisely in a high-tech sector. This study is unique in this respect. Another important distinctive character of this book is that it features a case of implementation and use of an internally developed CRM system, whereas much of the extant literature focuses on off-the-shelf CRM software packages. The very fact the CRM system in focus is an internally developed software brings to salience also the issue of constructing and developing it, which requires penetrating even deeper into the complexities of the implementation and embedding process. To sum up, this book differentiates itself from the others for the following reasons: (1) it is based on a unique case study within a B2B context; (2) it concerns the embedding process of an own-developed CRM system; (3) it conceives CRM as an interactive resource, by highlighting relevant theoretical and managerial implications; and (4) methodologically, one of the authors has been involved in the very process of embedding CRM, including the opportunity of directly interacting with the system for over three years.

1.5 The structure of this book

After this introduction, this book includes nine chapters. Based on literature reviews, the first four chapters (2–5) provide relevant theoretical and analytical concepts to prepare the reader’s general understanding of customer relationships in industrial networks, IT systems and organizations, CRM and the “resource interaction” perspective. Then, chapters 6, 7 and 8 present the case study of CRM at the Loccioni Group. This is followed by our analysis of the case, which also provides answers to our research questions (Chapter 9), before reaching our conclusions in Chapter 10. We now take a more detailed look at the contents of the various chapters.

Chapter 2 presents the key dimensions of customer relationships such as their complexity and intensity, which are fundamental to understanding the objects on which CRM systems are applied in industrial markets by organizations aiming to improve these relationships. The nature of customer relationships and the patterns of interactions they include are discussed with the help of literature on industrial marketing, and especially the IMP tradition. Chapter 2 concludes by providing a network view of Key Account Management, that is, the practice of managing key customer relationships.

Both the academic literature and practitioners widely recognize the role of Information Technology (IT) systems in supporting several organizational processes, but also the presence of numerous barriers and challenges when implemen...

Table of contents

• Cover
• Title Page
• Copyright
• Contents
• List of Figures, Tables and Boxes
• Acknowledgments
• 1. Introduction: Research Purpose, Methodology and Contribution
• 2. Customer Relationships in Industrial Networks
• 3. Connecting IT Systems, Users and Organizations
• 4. CRM, Its Roots in Management Studies and Recent Research Trends
• 5. Conceptualizing CRM as an Interacting Resource
• 6. Introducing CRM in an Industrial Company: The Case of the Loccioni Group
• 7. Adopting and Using CRM at the Loccioni Group
• 8. Managing Six Important Customer Relationships: Loccioni’s KAMs and CRM
• 9. Case Analysis: The Embedding and Effects of CRM at Loccioni
• 10. Conclusions: Results, Managerial Implications and a Research Agenda
• Notes
• References
• Index