Information Technology | ERP systems » Conceptualising social CRM in SMEs

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 relationship orientation H1 CRM technology use Customer engagement initiatives 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

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