Source: Adapted from Ulaga (2001: 316)
Payne and Frow (2005: 170) hold that the value creation process consists of three key elements:
determining what value the organisation can provide to its customers; determining the value the organisation receives from its customers;
and
managing the value exchange, maximising on the life-time value of desirable customer segments. Increasing customer lifetime value is an important aim of CRM (Dutu & Halmajan, 2011: 107).
The buyer's perspective: Value creation through products and
services
The seller's perspective: Value creation through
customer equity The buyer-seller
perspective: Value creation through
160 The elements outlined above correspond with the perspectives proposed by Ulaga (2001: 316) and shown in Figure 5.2, namely a buyer perspective, a seller perspective and buyer-seller perspective within a business market. Research into value in business markets has been orientated toward the assessment of how customers perceive superior value in the supplier offerings as compared to the offerings of the competition (buyer‟s
perspective). Many business markets today are organised into networks, within which organisations reciprocally create value through relationships by partnering and through alliances.
The value the customer receives from the supplier organisation is the total package of benefits, or added values that enhance the core product. According to Payne (2006: 104) when customers buy something, they expect benefits and value from the total offer the organisation provides. Without the perception that the customers are getting more than they are paying for, there will be little motivation for them to make repeat purchases (Richards & Jones, 2008: 122).
Customer value is the bundle of benefits customers perceive from a given relationship in both economic and psychological terms (Park & Kim, 2003: 655). For example, a frequent buyer programme offers economic value, such as membership discount or bonus points for repeat purchasing. Psychological value results from consistent communication between customers and organisations that help create an emotional bond between the
161 two parties, reduce perceived risks and increase stability of the customer‟s
future exchange with the organisation.
An example of added value could be where an organisation in the tourism and hospitality context shows pleasure at meeting new customers and acknowledges frequent guests. Other value services could include offering transport to and from the service site, making drinks and other amenities available and rewarding customer loyalty. As relationships are an important dimension of value, considerable efforts need to be expended on building and enhancing these relationships over time. The value received by the seller or the organisation is closely linked to that provided to customers.
Delivering superior value to customers is important for business success for a number of reasons. First, it has a positive effect on stakeholders such as customers, employees and shareholders. Organisations with a strong commitment to delivering superior customer value are likely to have a supportive organisational culture that focuses on customer‟s expressed
needs (Nguyen & Waring, 2013: 5). Second, superior customer value may lead to customer loyalty over the long-term (Josiassen et al, 2014: 131). Loyalty results from customer satisfaction (Roberts-Lombard et al, 2013: 196). Satisfied customers are more likely to repurchase the product or services and spread positive word-of-mouth messages. Creating customer value is thus a key source of competitive advantage.
162 The value that the organisation receives from the organisation-customer interface can be expressed in terms of customer equity (Kim & Kim, 2007: 5). Park and Kim (2003: 655) define customer equity as the sum of the customer‟s lifetime value. The customer‟s lifetime value is the profit that
would have been yielded by the customer if he/she had continued purchasing from the organisation for the expected number of years.
5.3 OPERATIONAL FACTORS
The following section discusses the operational components which, based on the literature review, are deemed important to any organisation and relevant to CRM. Operational components refer to the business processes and technologies that can help improve the efficiency of customer-interfacing operations and satisfaction of customer needs (Mishra & Mishra, 2009: 85). Operational components include the multi-channel integration process and information management.
5.3.1 Multi-channel integration process
The multi-channel integration process is one of the most important processes in CRM and in CRM strategy development (Payne & Frow, 2005: 172; Rodgers & Howlett, 2000: 10). Multi-channel integration involves all the contacts and interfaces between the customer and the organisation (Richards & Jones, 2008: 126). These activities include pre-sales communications, sales, and also service situations (Payne, 2006: 169).
163 The multi-channel integration process attempts to ensure a consistent and superlative experience for the customer across the different communication and transaction channels (Harrigan et al, 2009: 446; Payne & Frow, 2005: 172). The multi-channel integration process focuses on decisions about the use of the most appropriate combinations of channels, that is, how to ensure that the customer experiences positive interactions within those channels; and how to create and present a single unified view of the customer, regardless of their interactions across the different channels (Nguyen, 2009: 103).
There are a growing number of channels or touch points by which an organisation can interact with its customers. For the purposes of the current research the researcher categorised the numerous channel options into five groups based broadly on the balance of physical or virtual contact. These included (1) sales force; (2) telephone, including traditional telephone, facsimile, telex, and call centre contact; (3) direct marketing, including direct mail, radio and television; (4) electronic-commerce, including e-mail and the internet; (5) mobile commerce, including mobile telephone, short message service and text messaging, wireless application protocol, and 3G mobile services (Payne, 2006: 31). Figure 5.3 depicts the different touch points that may be relevant to SMTEs. These are subsequently discussed in more detail.
164
FIGURE 5.3