Competitors Intermediaries Suppliers MACRO ENVIRONMENT Socio-demographic Political Economic Natural Technological
Figure 1.2 summarises the stages proposed by Stefanou et al (2003: 617) and suggests an integration thereof with the typical growth stages of SMTEs. It also shows a number of typical factors that might impact the practice of CRM.
FIGURE 1.2
FRAMEWORK OF CRM FOR SMTEs
Source: Partly adapted from Saayman (in Tassiopoulos, 2011: 323); Stefanou et al (2003: 617)
12 The development stages shown in Figure 1.2 can be explained as follows.
The first CRM development stage is the preliminary, non-IT assisted stage. Organisations at this stage make no or limited use of IT. In the first phase from a general growth perspective, survival of the organisation is of paramount importance.
The second CRM development stage is characterised by the use of IT, in order to enhance the organisation‟s CRM and to analyse customer-
related data. In the second SME growth phase, profitability of the organisation becomes important.
In the third CRM development stage customer interaction with stakeholders takes place by using a number of technologies, such as the internet and telephone integration. Organisations at this stage would typically have active websites, engage in e-commerce, and have a degree of automation and a high level of efficiency of business processes, for example, processing of customer requests and orders. The focus is on growth of the business.
The fourth business development stage is the maturity phase. The organisation needs to modify its operations to maintain profitability. Integrated CRM could be used in this stage, leading to further customer personalisation and higher levels of service and customer satisfaction.
The fifth stage, termed rejuvenation, in the case of the business and of CRM, is characterised by sophisticated CRM information systems providing integrated front and back office and internet functions.
13 It is expected that the challenges, opportunities and implementation of CRM will differ according to the phase of development. Each development phase is likely to be influenced by micro, market and macro variables.
The microenvironment shown in Figure 1.2 consists of the SMTE itself, over which management has direct control. This control includes objectives, resources such as employee and managerial skills, financial assets, facilities and all other skills and abilities present in the organisation. Variables in this environment are a determination of the internal functioning of the enterprise, for example, the structure of the organisation, its culture and resources (Van Aardt, Van Aardt, Bezuidenhout & Mumba, 2008: 105). Further, it is recognised that the resources of the SMTE are not only raw materials, but also include employee and managerial skills, financial assets, facilities and all other skills and abilities present in the organisation (Tassiopoulos, 2011: 26).
A number of authors explain different components that contribute to the growth of small organisations: the resources of the owner, the organisation and the strategy (Chiliya & Roberts-Lombard, 2012: 462-464; Nieman & Nieuwenhuizen, 2009: 282-283; Van Aardt et al, 2008: 5-10). These components include a variety of elements, such as age, education, skills, gender, management experience and motivation of the owner, as well as organisation size and training.
The market environment shown in Figure 1.2 comprises those variables that exist outside the SMTE and include consumers, competitors, intermediaries
14 and suppliers. The macro environment thus includes other, more general, forces that do not influence the activities of the SMTE directly, but which may have an impact on its decisions (Tassiopoulos, 2011: 27) such as socio- demographic, political, economic, natural and technological factors (George, 2013: 46-47).
Tie (2003: 9) observes that unlike large organisations, SMEs often do not possess sufficient technology expertise, resources and information technology personnel to implement a CRM programme. As a result, most SMEs cannot afford expensive CRM products offered by traditional CRM vendors. An in-house CRM system widely employed by large organisations seems inapplicable to SMEs and therefore using application service providers (ASP) could be considered in order to reap the benefits of CRM (Tie, 2009: 9).
In addition to the challenges faced by SMTEs, not all organisations are necessarily ready to implement CRM. Common barriers to CRM success include the following (Ozgener & Iraz, 2006: 1362; Ryals & Payne, 2001: 20):
the lack of skills;
inadequate investment;
poor data quality and quantity;
failure to understand the business benefits of CRM; lack of leadership and top management involvement; and
15 In addition, the problems many organisations experience, both in deciding whether to adopt CRM and in its implementation, stem from the fact that a great deal of confusion exists about what exactly CRM is. This confusion maybe explained by the three factors (Payne, 2006: 18) as listed below, namely:
the lack of a widely accepted and clear definition of CRM‟s role and
operation within the organisation;
an emphasis on information technology aspects rather than CRM benefits in terms of building relationships with customers; and
the wide variety of tools and services offered by information technology vendors, which are often (perhaps mistakenly) sold as CRM.
To summarise, the important role of tourism in the context of small business and its potential for job creation and growth in the SMTE sector gave impetus to this study. Further, the role of CRM as a key competitive strategy became the focus of the study, giving direction towards the research problem, objectives and conceptual framework.
16
1.2 RESEARCH PROBLEM, OBJECTIVES AND CONCEPTUAL
FRAMEWORK
The discussion presented in section 1.1 culminated in the following conclusions which formed the research problem, objectives and conceptual framework for this study.
Tourism is important to the economic development of South Africa and particularly to the Eastern Cape because of the positive contribution it can make to job creation, poverty alleviation and growth.
SMMEs are particularly poised to play an important role in the above. Establishments in the tourism and hospitality sector form an integral part of tourism providers and also those SMMEs where job creation is most needed.
CRM can enhance the business success through its contribution to customer satisfaction, loyalty, profitability and sustainability.
Successful CRM requires management support and commitment of resources such as time, money, training and technology. Research into CRM should therefore engage the management of the SMTEs. CRM also requires the integration of organisational processes and
alignment of technology and effective data use. CRM development is often seen as a succession of information technology use.
CRM is also impacted by the characteristics of the organisation, such as its size and shape.
17 Based on the preceding points, it becomes evident that CRM requires the presence of strategic, operational and organisational factors which are combined in a cross-functional, process-orientated approach.
SMTEs have to deal with challenges typical of small organisations such as lack of skills and finances that may impact CRM.
CRM often fails because of a lack of definition and a narrow focus. CRM might fail because the focus is placed on its strategies, benefits
and implementation before it is verified that the required strategic, operational and organisational factors are in place.
An exhaustive literature search was conducted on CRM to locate literature on CRM associated with small to medium tourism enterprises. International and national database searches at Walter Sisulu University (WSU) and at Nelson Mandela Metropolitan University (NMMU) included Proquest, Sabinet, Nexus, Google Scholar, relevant abstracts and indexes, Dissertation Abstracts International and the Internet. Further data were accessed from various international and national libraries through the inter-library loan facilities at NMMU. The literature search covered issues such as CRM management, strategies and its implementation. While some work had been done on CRM in the South African context of financial services, banking services, knowledge management, customer strategies and customer loyalty (Berndt, Herbst & Roux, 2005; Cloete, Courtney & Fintz, 2002; Du Plessis, 2010; Roberts-Lombard, 2009; Roberts-Lombard et al, 2013; Rootman, Tait & Bosch, 2008; Rootman, Tait & Sharp, 2013) notable publications on CRM
18 within South African SMTEs and particularly within SMTEs in the Eastern Cape were not located.
In addition, most studies focused on financial services, customer strategies and customer loyalty of CRM, but did not investigate the relationship between strategic, operational and organisational strategies required for CRM. Of further significance for the current study is the fact that very few studies appeared to have focused on CRM frameworks and models for small to medium businesses, but mostly dealt with large organisations (Nguyen & Waring, 2013: 2). The current research thus attempted to fill these voids.
The study thus sought to contribute to knowledge by answering the following research question:
“Do SMTEs in the EC exhibit the strategic, operational and organisational factors required for CRM?’’
To answer this research question, the following objectives were set.
1. Provide an overview of the importance of tourism and the role of SMTEs in the tourism industry of the EC.
2. Explain the characteristics of SMTEs and examine them among respondent organisations.
3. Describe the development and growth of CRM.
4. Describe the factors that have to be in place prior to the development of CRM in SMTEs.
19 5. Determine the presence of the factors identified in Objective 4 among
SMTEs and examine the relationships between these factors.
6. Integrate the knowledge resulting from the preceding objectives to provide a profile of the respondent organisations with respect to CRM.
In addition to the discussion in section 1.1, the review of the literature showed that CRM is customer-focused, takes a wider view and dynamically integrates sales, marketing and customer service and care to create and add value to both the organisation and its customers (Nguyen & Waring, 2013: 10). As an organisational goal, it uses a set of IT applications that help automate customer-interfacing processes (Iriana & Buttle, 2006b: 23). CRM furthermore involves a profound synthesis of strategic vision; a corporate understanding of the nature of customer value in a multi-channel environment; the utilisation of the appropriate information management applications and the utilisation of high-quality operations. CRM is therefore positioned in the broad strategic context of the organisation (Payne & Frow, 2005: 168).
In addition, CRM provides a strategic bridge between the operational and organisational factors and strategies (Racherla & Hu, 2008: 31; Ryals & Payne, 2001: 3). Organisational factors include aspects such as the structure and size of the business and the number of years the business has been in existence. Organisational resources include financial resources, human resources, training, skills, knowledge and innovativeness (Racherla & Hu, 2008: 43). Operational factors help improve the efficiency and effectiveness
20 of customer management processes, by improving the organisational response to customers‟ needs (Iriana & Buttle, 2006b: 27).
Ko et al (2008: 66) and Iriana and Buttle (2006a: 138) have linked organisational culture and organisational characteristics as essential for CRM readiness while Sudhakar and Sudharani (2012: 543) single out an organisation‟s level of hardware, software and financial resources as being
essential for CRM readiness. Further, Croteau and Li (2003: 25) highlight the availability of technological resources (for instance IT sophistication and technological skills) as pivotal to CRM readiness, low levels of IT sophistication and resources are often typical of small businesses, and must be considered when initiating CRM amongst SMTEs (Iacovou, Benbasat & Dexter, 1995: 465).
The literature also shows a link between CRM readiness and business performance. Dutu and Halmajan (2011: 109) found a positive relationship between customer-related outcomes and business performance. CRM readiness is related to the level of available technological resources, which may affect business performance (Dutu & Halmajan, 2011: 106). According to Josiassen, Assaf and Cvelbar (2014: 130) CRM has become of crucial importance to many organisations. Many organisations have implemented CRM technology with the hope that it will enable them to better target profitable customers, improve customer service, enhance customer retention and ultimately improve organisations‟ business performance. Many authors
21 are of the view that improved customer retention can also lead to an increased level of employee satisfaction.
Satisfied employees influence customer satisfaction, which positively impacts upon business performance (Brink & Berndt, 2010: 43; Chalmeta, 2006: 1021; Chen & Popovich, 2003: 681; Morphitou, 2008: 533; Payne, 2006: 288; Prasongsukarn, 2006: 28; Racherla & Hu, 2008: 33; Roberts-Lombard, 2009: 72). Based on the background discussion, the list of conclusions presented in section 1.2, and the objectives of the study, a conceptual framework could be constructed as presented in Figure 1.3.
FIGURE 1.3