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MERC Globals International Journal of Management

ISSN 2321-7278 (Print) and ISSN 2321-7286 (Online) Vol. 1, Issue 2: October-2013, pp. 103-119 Permanent URL: http://www.mercglobal.org/ijm-vol1-issue2-oct2013.html MERC Global

Customer Relationship Management Implementation Strategies in Hotel Industry


Brijesh Kumar Yadav Junior Research Fellow, Faculty of Management Studies, Banaras Hindu University (BHU), Varanasi, Uttar Pradesh, India ABSTRACT Customers are becoming price sensitive, less loyal and more switchers in terms of preferring products and services. Customer relationship management (CRM) is an authoritative tool, which characterizes an imperious role to attract, retain, and maintain relationship with customers for life time. However, the successful implementation of CRM is a distinguished issue as only successful CRM implementation can accomplish the target of attracting, retaining, and nurturing relationship with customers. CRM is venerated as business strategy, fetched by organisations to proclaim the strategic relationship with customers, which subsequently leads to the loyalty among the customers. The evinced work concentrates on the implementation issues of CRM, which foster the organisations especially in the hotel industry to retain customers for life time. Today, customers (guests) are laudably conscious about the price, brand, and competition in the hotel industry. Therefore, patronage of guest loyalty is a very challenging endeavour in hotel industry as customers vacillate brands even they are fully satisfied. Furthermore, in this paper a manoeuvre is also elicited to recognize the divergent implementation issues which are fastidious to successful implementation of CRM. As the last endeavour, a CRM implementation model has been conceived, which will augment the value in the implementation of CRM especially in the hotel industry.

KEYWORDS: CRM, CRM Implementation, Implementation Issues, CSF, Customer, Loyalty, Hotel Industry

ARTICLE TYPE: Review paper

INTRODUCTION The hotel industry is experiencing globalization, liberalization, increased competitiveness, increased customer switching rate, increasing customer acquisition costs, less brand loyalty,

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the more price sensitivity etc. as other industries. Several studies manifest that the hotels must concentrate on the implementation of CRM to engorge the guest loyalty, which ultimately engorged the profitability of the entire organisation. CRM commits to accumulate and archive information about customers and disseminate this information throughout the organisation to ensure creation of customized services by an organisation to bestow a unique customer experience.

CRM can bring many benefits to hotels like increasing customer satisfaction, loyalty, customer retention, market share, tenure of customers with the organisation and decreasing acquisition costs. Hospitality industry, which markets leisure, realizes it very challenging to the implementation of CRM. Several Studies evince that more than 50% CRM

implementation program collapses, moreover does not apprehend predetermined goals and objectives. Successful CRM implementation is which achieves target of attracting, retaining, and nurturing relationship with customers. Therefore, successful CRM implementation in any industry or organisation is a challenging task and requires commitment at each level of the management. There are so many approaches proposed by eminent scholars for

implementation of CRM successfully, which encompass various dimensions.

In the evince chore, an endeavour is elicited to breakthrough issues in the implementation of CRM effectively in the hotel industry.

CRM: AN OVERVIEW The CRM has been defined by several scholars from different points of view. The concept of CRM has been enriched from various viewpoints namely satisfaction, loyalty, retention, allocation of recourses for retaining customers, top management involvement in support of CRM, employee involvement, effective chain management, after sale services to customers, organisational learning, organisational structure etc. In this part of the paper, views of several contributors towards the concept of CRM have been covered.

The concept and definition of CRM is very fragmented and spread in several areas from information technology to loyalty and from customer satisfaction to customer retention. Ngai (2005) remarked that CRM is a widely accepted business approach throughout and indicates that there is no definition, which is accepted unanimously. Zineldin (2003) orated that CRM is a complex and holistic concept requiring appropriate business process and integrated systems. Moreover, it also mandates effective system integration, information sourcing, ~ 104 ~

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targeting, leadership and evaluation within CRM strategies. Zineldin (2006) added that customer loyalty and competitive positioning can be achieved by the organisation through superior product/service quality, product differentiation, and CRM. He further emphasised that high quality product and service along with CRM give the opportunity to provide customer something new, distinctive and special.

Pyne and Frow (2005) developed definitional aspect of CRM and identified three perspectives of CRM, moreover emphasised on the need for cross functional, process oriented approach in CRM at a strategic level. They identified five key cross-functional CRM processes namely value creation process, information management process, multichannel integration process, strategic development process, performance assessment process. They developed a new conceptual framework of CRM based on these processes and have defined the role and functions of each element in the framework.

Ryals (2005) analysed that CRM endeavours deliver greater profitability of the organisation. However, CRM should be implemented effectively. Customer relationship can be effectively implemented by using various knowledge management measures such as technological tools and informational infrastructure etc. (Cao and Gruca, 2011; Minghetti 2003). According to Dyche (2001) CRM can be framed into following main categories i.e. operational CRM, analytical CRM and collaborative CRM. The operational CRM facilitates the organisation to face the customer, while analytical CRM in which customer data are used in such a way that nurture the relationship with customers, tools like data warehousing and data mining are used in analytical CRM. Collaborative CRM is an approach of collaboration with customers through several channels which enhance the quality of customer interaction.

Sin et al. (2004) developed the CRM scale in which they have elicited four major constituents of CRM namely key CRM organisation, customer focus, knowledge management, and technology-based CRM. Key customer encompasses the profitable or important customers. The CRM organisation encompasses organisational structure, organisation wide commitment, human resource management etc., Knowledge management encompasses knowledge

generation, learning, dissemination, sharing and responsiveness, whereas technology based CRM calls for all measures to be included which make organisation IT enabled.

Frow et al. (2009) perceived CRM as a process and stated that its dark side can be aligned with Key CRM strategies to make it more effective. Scholars have stressed on the effective ~ 105 ~

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use of CRM and making valued customers, Ryals (2005) said that value of customers and customer management strategies are interlinked with each other, while (Payne and Frow, 2005) vocalized that value creation process in which customers and the organisation receives value is an interconnected process with the other linked process of relationship management.

Christopher et al. (1991) conversed about relationship approach in effective marketing and argued that the relationship based approach is required as a new way of effective marketing environment, they further emphasised that one-to-one relationship is required to make the customer happy as well as organisation profitable. Reinartz and Kumar (2003) developed a framework to suggest the projection of profitability of customers. They developed various key implications which are useful for decision makers in long term relationships. Ryals (2005) explained that retention of customers is not only an important area, but retention of profitable customers is decisive for any company.. Moreover, he confronted that value of customer and customer management strategies are closely interlinked and analysis of customer value will lead to the change in strategies of customer management.

Osarenkhoe and Bennani (2007) rationalised in their study that degree of success is purely based on the level of involvement of employees of the organisation at several organisational stages. Furthermore, they elicited in their study that involvement of top management, systematic communication, customer loyalty, training programs are very authoritarian in successful CRM implementation. Srinivasan and Moorman (2005) have nodded out in their research that prior strategic commitments consign impressive results on the performance of CRM investment. Love et al. (2009) educed that top management support is consequential in successful implementation of CRM because employees will not follow the new ideas until executive do not show high level commitment in it.

Gustafsson et al. (2005) discussed that customer retention is possible with the help of customer satisfaction, affective commitment and evaluative commitment. CRM managers have to elect the factors to focus on. If CRM managers fumbles that customer satisfaction is the main driver of customer retention, all the programs and plans should endeavour to augment the customer satisfaction. Harrison et al. (2004) remarked that companies must proactively assist during every stage of the buying process and continuing the bolster after the sale. They advocate over the use of business to business relationship practices.

Tanner et al. (2005) expressed that account management and organisational structure yearn to be addressed in customer relationship management. They emphasised that all care should be ~ 106 ~

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taken into consideration in the adoption of the CRM special effect of environment and cultural factors on employee. Companies should address the operational issues concerning in the implementation and maintenance of CRM strategies. Bendapudi and Leone (2002) signaled over the relationship of employee and customer, elicited that sometimes employees and customers have stronger relationship rather than firm-customer relationships. They proposed the management of customer-firm relationship and the firm-employee relationship. The firm should offer more service, emphasis on corporate citizenship, and develop more sources of links for customer contact.

Scholars also contributed in terms of CRM applications and its effectiveness in advancing customer knowledge. Mithas et al. (2005) educed in their study that CRM applications enhance the customer knowledge when firms share more information with their supply chain partners. Their study also determined the mediating role of customer knowledge in effect of CRM applications on customer satisfaction. Customer relationship perception and

relationship marketing instruments are very effective in customer retention and customer share development. Verhoef (2003) investigated on the issue of customer relationship perception and relationship marketing instruments. He examined the effect of these two points on customer retention and customer share development and elicited that affective commitment and economical relationship marketing instrument programs enhances customer retention and customer share development. Furthermore, He proposed that positive customer perception and effective use of relationship marketing tools can be very progressive not only for short term but for the long term too.

Morgan and Hunt (1994) in their research on relationship marketing remarked that relationship marketing constitute a base for establishing, developing and maintaining successful relational exchanges. Taylor et al. (2009) stressed on relationship commitment and trust for successful relationship marketing and argued that CRM also enlightens in terminating unprofitable customers though analytical CRM. Zeblah et al. (2003) conversed that CRM is a philosophically-related offspring to relationship marketing which is neglected in the most part of the literature. Further, implied that further exp loration of CRM and its related phenomena is not only warranted but also desperately needed. Based on these several contributions, it can be inferred that CRM concept is very vast and researchers have defined it in different ways. Researchers emphasised on various issues but especially on loyalty and retention of customers. Furthermore, it can also be inferred that CRM leads to the loyalty of customers and that will ultimately result in the retention of the customers for a long time.

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Customer Relationship Management Implementati on Strategies in Hotel Industry

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CRM IMPLEMENTATION STRATEGIES CRM is considered as an essential strategic issue. Therefore, needs to be addressed carefully because implementation of CRM is very crucial in business practices. Scholars have proposed several implementation models which can be adopted for successful

implementation of CRM in any enterprise. Various scholars (Pyne and Frow, 2005; Sin et al., 2005; Bull, 2003; Parvatiyar and Sheth 2002; and many more) have contributed to the framework of CRM for effective implementation and better organisational structure for CRM performance.

CRM implementation is a holistic and complex notion, which organized around business processes, information technology integration (Piskar and Faganel, 2009; Bull, 2003), business process re-engineering and organisational learning centralized to a shared vision (Chang 2007). People, process and technology are the key in the implementation of CRM (Chen and Popovich, 2003; Zeblah et al., 2004). Business strategy, current organisational capabilities and a sound reason of implementing CRM in the organisation is the pre-requisites for a successful CRM implementation (Nguyen et al., 2007). Gillies et al., (2002) discussed that a strategy which is based on the segmentation of customers is stipulated for implementing a sound CRM solution. Customers must be integrated in the CRM implementation process as customer integration in the process of CRM implementation can turn the customers loyal towards the organisation (Wetsch, 2006).

Osman and Hemmington (2008) stressed on transactional marketing rather than relational marketing. They determined in their study that transactional marketing is an effective strategy for the hotels. It is an eminent approach for creating guests loyalty in the hotel industry. Furthermore, they also identified an alternative approach to customer loyalty through transactional marketing rather than relational approach to maintain long term relationships with customers; transaction approach to marketing boosts the customer loyalty as it involves a sense of transparency and consistency while dealing with customers.

Fletcher and Wright (1996) affirmed that successful CRM implementation mandates full support and commitment of top management. Sigala (2004) evinced that perceived CRM goals are met when the corporate goal for ICT (Information, Communication and Technology) are put together with a focus on CRM applications. She has also germinated several measures that managers yearn to adopt to enhance CRM benefits i.e. gaining support of top management for cost reduction, revenue enhancement etc., determining the model for ~ 108 ~

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automation of business, involving middle level management in process and monitoring continuously over ICT implementation. Wells et al. (1999) illustrated the key elements for CRM implementation as business process analysis, redesign of customer data, accessibility of organisational information, and ICT enabled customer interaction. According to them, these four elements are very progressive in successful CRM implementation. Sigala (2005) suggested the organisation of business processes, comprehensive understanding of the customer base and technology for implementation of CRM. She also implied the regular customer feedback from hotel guests irrespective of their profitability, customer base, culture, environment for CRM to be effective in the hotel industry. She proposed it as an integral to not only at the operational level but also at functional and corporate level.

Emperger (2004) highlighted the authoritative extracts from qualitative analysis of his study, i.e. guest profile management, campaign management and security, referred the appointment of external consultants or CRM software companies to alter the business culture of the hotel company as customer focus mandates change in business procedures. Lo et al. (2010) pointed out CRM activities in the hotel industry, which helps hoteliers to conceive a better understanding of customers requirements and expectations, managing the need of customers and life cycle of the customers. Sigala and Christou (2002) notified that CRM is an influential strategy to gain competitive advantage in current market scenario. Sigala (2005) in her study coined that CRM is an imperative strategy for attracting and magnifying the guest patronage in the hotel industry. OConnor and Murphy (2004) in their review on hospitality research argued that researchers should enlarge their thinking process and should focus to enrich the areas like management of IT resources in the hospitality industry.

Chang (2007) in his research pointed a thought on implementation of customer relationship management, which consists business process re-engineering and organisational learning. Furthermore, he augmented that if CRM is implemented with the factors, which is said to be relationship quality that will convert into a good organisational performance. Piccoli et al. (2003) stressed on increasing customer loyalty to enhance the organisational performance and remarked that effective CRM implementation can increase customer satisfaction which results in customer loyalty, therefore customer acquisition costs will go down and overall performance of the organisation will automatically improve. Although, it is said that CRM strategies are imperative for organisational performance but its implementation issue can have both positive and negative effects (King and Burgess, 2007). Furthermore, they

disclosed that more than 50 percent of CRM projects fail due to some implementation issues. Moreover, they recommended a successful CRM implementation model. ~ 109 ~

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Osarenkhoe and Bennani (2007) intimated the five core dimensions of relationship strategy implementation. These dimensions are Structure, Staff, Style, Systems, and Schemes . The structure contains the organisational structure for relationship management. Staffs are the people of the organisation who will be endeavoured in the process of managing the relationship. Style denotes the ways of performing anything by managers to evoke sure the outcome of the relationship and implementation strategy. Systems are the structure of the relationship platform at which the entire CRM strategies are implemented like services sales process, supply chain management, order fulfilment system etc., and the last dimension is the scheme which is a programme that support relationship implementation like loyalty and relationship programmes, relational communication etc.

Yim et al. (2004) intimated the four dimensions of CRM implementation, first is focusing key Customers in which deep customer relationship is encouraged which facilitate to have a long term relationship with customers by running programmes, policy, schemes for customers. The second dimension of CRM implementation is organizing around CRM , which describes that the organisational structure of the organisation should be flexible enough to address the valuable relationship with customers at its prime priority. The third dimension of CRM implementation is Managing Knowledge , as any successful CRM implementation depends on customer information. Information related to customers must be accumulated at various touch points where customers interact with company employees and that information can be employed to engorge customer profitability. The last and fourth dimension of CRM implementation is CRM based Technology, as information management tools will foster for gathering, processing, analysing and retrieving information to take necessary action to address the need of customers individually. Here, the four dimensions of CRM implementation suggested by Yim et al. (2004) clearly put the way forward to make CRM implementation a complete CRM strategy. These four dimensions have equal importance in terms of successful CRM implementations in any industry as well as hotel.

Sigala (2005) in the research paper on hotel operations proposed an integrated and comprehensive model of CRM implementation. The first component of the model is Knowledge Management, which is considered as the critical success factor in the relationship market. Knowledge management includes collection, analysis and retrieval of information aligned with ICT (Information, Communication and Technology) management to convert customer interaction as learning experience. Therefore, knowledge management should strive to collect information on customer, from customers and from customers. The second component of the model is Relationship Marketing, as only increasing business ~ 110 ~

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transaction is not enough but the style of guests interaction matters. Employees should be expert to deal with technology and knowledge based work irrespective of their spatial, time and cultural differences. The third component of the model is ICT Management. ICT should be aligned with organisational infrastructure so that various touch points of customers can be efficiently used by customers and employees. Moreover, ICT should be used to enhance the per customer yield during the business.

CRITICAL SUCCESS FACTORS FOR SUCCESSFUL CRM IMPLEMENTATION Extensive review of literature guides in finding the Critical Success Factors for Implementing CRM, which also can be considered as critical success factors in the hotel industry. Table 1 states some critical factors identified for effective Implementation of CRM.

Table 1: Critical Success Factors for a Successful CRM Implementation Critical Success Factors Key Customers, Organizing around CRM, Managing Knowledge Staff, Style, Structure, Systems, Schemes CRM Processes and Integration of Information Technologies Efficient Leadership, Orientation towards Customers, CRM Strategy Implementation and Control, Customer Centric Approach Employee Commitment to CRM Initiative Employee, Process, Technology, Understanding Customers Business Strategy aligned with CRM Implementation Program, CRM Capabilities, Reasons of Implementing CRM CRM Commitment at firm level, Timing of CRM Implementation Customer Expectation Cooperative Environment, Top Management Involvement Interdepartmental Commitment, Establishing Central Data Warehouse Efficient use of Information Technology Front Line Information System, Integrated CRM Platform Customer Involvement ~ 111 ~ Contributors Yim et al. (2004) Osarenkhoe and Bennani (2007) Bull (2003), Piskar and Faganel (2009) Piskar and Faganel (2009), Smith and Chang (2010) Shum et al. (2007) Zeblah et al. (2004), Chen and Popovich (2003) Nguyen et al. (2007)

Krasnikov et al. (2009) Kim et al. (2012) Kotorov (2003), Fletcher and Wright (1996) Xu et al. (2002) Ryals and Payne (2010) Parvatiyar and Sheth (2002) Wetsch (2006)

Customer Relationship Management Implementati on Strategies in Hotel Industry

Brijesh K. Yadav

PROPOSED CRM IMPLEMENTATION MODEL Based on the comprehensive literature review, a model of CRM implementation especially for hotel industry is proposed, which is depicted as figure 1.

Figure 1: Model of CRM Implementation in Hotel Industry

Description of Proposed CRM Implementation Model This proposed CRM implementation model for hotel industry comprises divergent elements in an integrated manner. In this proposed CRM implementation model, the top management support is rationalised as imperative yearn for commencing any kind of structure to foster the CRM implementation. Not to mention, it is also important that the middle level management of the organisation, which has to commence the structure of the organisation around which a CRM program is developed, should get prior consent of the top management for their full support and commitment in CRM implementation. Staff, style and system are the three important components, which are proposed as the integral part of a CRM structure of the ~ 112 ~

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organisation on which success of CRM implementation is anticipated. Staff can also be termed as people or employee of the organisation. It is quite envisioned that staff has to play an authoritarian role in successful implementation of CRM as they are the first point of contact and responsible to manage relationships with customers (guests) in the hotel industry. Additionally, the role of staff is critical in the overall CRM implementation process as they are also pivotal to implement each step CRM endeavours. The second component of CRM structure is style, which indicates the ways of handling the various processes by responsible staff or managers. Here, it is coveted to have managerial abilities for performing operational and analytical tasks by staff. The third component of proposed CRM structure is a system, which intends a platform at which whole relationship related to operations is carried out. Structure of CRM should be evinced by many other systems of the organisation like supply chain management system, front desk system, back office system, online system, IT system etc.

The second part of the CRM implementation model comprises two elements i.e. Knowledge Management (KM) and Information, Communication and Technology (ICT). This part of the model bolsters the CRM structure as depicted in figure 1. Here, knowledge management is to consign the support for assembling information about the guests, the service pattern, guests history etc. and disseminating the information to specific service points, where the information can be utilized to serve guests in an improved way. KM should be evinced by ICT as manifested in the figure 1. Organisations may get the support of various related software packages and other tools, which enables the users to extract the information from the raw data, which is really very advantageous in KM.

Third and the last part of the model is CRM Strategies. CRM Structure and KM empower staff/managers to equip any organisation with appropriate CRM strategies, which would be proficient to attract and retain the guests for life long. CRM structure facilitates the staff to assess the real business value of any prospects or customer. CRM strategies should be envisioned for customers based on customer lifetime value to the organisation. Therefore, hotels should envision CRM strategies based on the analysis done earlier in CRM structure with KM and ICT tools. Customer lifetime value (CLV) assessment will foster in envisioning schemes, retention relies customers. and on loyalty program for prospects/guests. customers should and Success gradually in of CRM

implementation unprofitable performance.

retaining CRM

profitable

terminating organisational guests

implementation

contribute

Guests satisfaction,

employee performance,

employee retention,

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retention and loyalty, increasing market share, decreasing costs of operation are some of the parameters of organisational performance in any industry. Hotels should also check the organisational performance by evaluating such organisational performance parameters.

CONCLUSION, MANAGERIAL IMPLICATION AND FUTURE RESEARCH The hotel industry is witnessing manifold challenges at the micro as well as macro levels. Competition in the industry has gone at its apex level. Nowadays, the prime objective of any hotelier is not only to attract the profitable customers but also retaining them for a lifetime to convert them as loyal. Relationship marketing and customer relationship management empower the organisations to do so. A successful CRM implementation is a crucial task for organisations and requires management support, focusing key customer, organizing around CRM, knowledge management, style, staff, system, efficient leadership, customer centric approach, employee commitment, inter departmental commitment, efficient use of

information technology etc.

In this paper, a model of CRM implementation in the hotel industry has been proposed, which highlights CRM implementation elements. CRM implementation germinates from the conception on the support of top management. Other component of the model comprises of CRM structure, KM along with ICT. CRM structure comprises staff, style and systems, whereas KM and ICT bolster the CRM structure for effective CRM implementation. CRM strategies are the last component of the proposed model. CRM Strategies should be envisioned on the basis of an evaluation of customers (guests) analysis of CRM structure of the organisation with the assistance of KM and ICT and thereafter, a concrete strategy for guests should be fostered.

The main objective of CRM implementation is to originate long term relationship with clients and making sure that they remain in business terms with organisation for life time. Hoteliers must understand their each guests personal characteristics to serve them foremost. Hoteliers expected to spend time for studying the guests behaviour at a regular interval to retain them. Practicing managers can study and understand the specific needs of guests by utilizing organisational CRM structure, KM and ICT.

The current study highlights insight of CRM implementation strategies in hotel industry. The study integrates important elements in a single platform to foster CRM implementation a success in the hotel industry. Critical success factors for CRM implementation has also been

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elicited in this study. Critical success factors and CRM implementation model can be very instrumental in strategic, analytical and operational issues not only in the hotel industry but also in other industry practicing relation based marketing to retain their customers. The study also proposes some influential implications for practicing managers in a competitive business environment.

This study has revealed several key factors for successful implementation of CRM in the hotel industry, which consign an opportunity to investigate empirically the relationship of CRM implementation for retaining guests. Research in the area of CRM implementation will further add some insights in relational marketing aspects. There is also a need to test empirically the CRM implementation model proposed in this study.

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