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Open Source Customer Relationship Management Solutions

Potential for an Impact of Open Source CRM Solutions on Small- and Medium Sized Enterprises

Bachelorarbeit 2008 93 Seiten


Table of Contents

List of Figures

List of Tables

List of Abbreviations

1 Introduction

2 Importance of CRM for Small and Medium-Sized Enterprises
2.1 Customer Relationship Management
2.1.1 Definition
2.1.2 Reasons for Using a CRM
2.1.3 Opportunities and Risks of CRM
2.2 Small and Medium-Sized Enterprises
2.2.1 Definition
2.2.2 CRM for Small and Medium-Sized Enterprises

3 Requirements of Customer Relationship Management
3.1 Criteria Based Requirements of CRM
3.1.1 Basic Components of a CRM System Analytical CRM Operational CRM Collaborative CRM
3.1.2 Main Features of a CRM System
3.1.3 Special Requirements of Small and Medium-Sized Enterprises
3.2 Requirements of a Successful Implementation of a CRM System
3.2.1 Prerequisites for Implementing a CRM System
3.2.2 How to Ensure a Successful Implementation

4 Open Source CRM Solutions
4.1 Open Source
4.1.1 Definition
4.1.2 Why to use Open Source Software
4.1.3 Open Source CRM Solutions Sugar CRM vTiger OpenCRX
4.1.4 Comparison of the three Open Source CRM Solutions
4.2 Could Open Source CRM Solutions Fulfill the Requirements
4.2.1 Basic Components
4.2.2 Main Features
4.2.3 Special Requirements of Small and Medium-Sized Enterprises

5 Conclusion


Internet Sources


List of Figures

Figure 1: The Transition from Traditional to Relationship Marketing

Figure 2: The Four Steps in Managing and Creating Customer Value

Figure 3: The Definition of Small and Medium-Sized Enterprises

Figure 4: The Thresholds of Small and Medium-Sized Enterprises

Figure 5: Components of a CRM Information System

Figure 6: Decision-Making for a CRM System

Figure 7: The Different Sugar CRM Editions

List of Tables

Table 1: Advantages and Disadvantages of Sugar CRM

Table 2: Advantages and Disadvantages of vTiger

Table 3: Advantages and Disadvantages of OpenCRX

Table 4: Functional Comparison of Sugar CRM, vTiger, and OpenCRX

List of Abbreviations

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1. Introduction

In order to stay ahead of the competition companies are more and more forced to turn their attention to their real assets: their customers.

Both, the value of the individual customer and the development of personalized relationships with them have made customer relationship management as one of the emerging topics in the last years.

Faced with the increased knowledge of the customers about existing product- and service offerings on the market, companies are more than ever required to develop specific customer knowledge in order to adapt their products and services according to the requirements of the customer.

Customer relationship management is no longer something that only huge leading enterprises use in order to gain a competitive advantage.

In the increased competitive landscape, it is now a necessity for survival even for small and medium-sized enterprises.

Customer relationship management is a complex and difficult way of doing business. CRM means more than just installing a software or automating customer touch points. It is about the reinvention of a customer-oriented organization.

According to the special requirements of small and medium-sized businesses, the degree of difficulty of the CRM approach even increased.

The following Bachelor’s Thesis reveals the overall importance of a customer relationship management system especially for small and medium-sized enterprises. In addition to the topic of CRM, the increasing importance and possibilities of open source software is revealed.

The main research question consists of the idea if open source customer relationship management systems are able to fulfill the requirements of a CRM software.

In order to be able to answer this question, the following Bachelor’s Thesis made use of the literature available on the topics CRM, special requirements of small and medium-sized enterprises, and the topic of open source software.

By revealing what a CRM have to fulfill in order to be classified as customer relationship management system according to the findings in the literature, various requirements are identified.

In the next step, the three most popular open source CRM software systems Sugar CRM, vTiger, and OpenCRX are scrutinized under the criteria if they are able to fulfill the requirements defined in the previous steps.

The conclusion discusses the previous findings and outlines the chances and limits of open source customer relationship management solutions for small and medium-sized enterprises.

In addition to this, the requirements of a successful implementation of a CRM system are revealed and the concept of seeing CRM as a corporate strategy is concretized.

The aim of this Bachelor’s Thesis is to outline the holistic approach of CRM and to examine the research question if open source CRM solutions are able to fulfill the requirements previously defined according to the underlying literature.

2. Importance of CRM for Small and Medium-Sized Enterprises

The following chapter reveals the overall importance of customer relationship management with special focus on small and medium-sized enterprises. After defining the term customer relationship management in general, the chapter depicts the reasons for using a customer relationship management and introduces the term customer lifetime value and the importance of customer knowledge.

Before concentrating on small and medium-sized enterprises, the opportunities and risks by the implementation of a customer relationship management will be qualified and compared with each other.

In the second sub-aspect the connection between the topic customer relationship management and small and medium-sized enterprises will be drawn by revealing the specialties when implementing a customer relationship management system into a small and medium-sized enterprise.

2.1 Customer Relationship Management

2.1.1 Definition

Historically the origins of CRM can be traced back to the beginning of the eighties of the last century, where criticism about the dominating “4P” (products, price, promotion and place) marketing paradigm emerged (Kotler et al. 2001: 105-110). One of the first authors who emphasized the importance of relationships in the industrial marketing was Hakansson (1982: 19).

After the introduction of the relationship model, Berry (1983: 236-245) was one of the first who used the term relationship marketing and gained wide recognition. In parallel to the advances in the marketing science, new software systems were made possible through new hardware and software offerings. Since the mid-nineties, the term relationship marketing evolved into customer relationship marketing and many IT vendors started to market their products as CRM systems.

In spite of the progress which has been made, there still remains some confusion about the meaning of CRM. Depending on the origin, the main focus, and the intention the definition and meaning of customer relationship management could vary according to the different view points from science, research and practice (Wiedmann and Greilich 2002: 283). Reasons for this could be found in the fact that CRM affects many groups and therefore every department in the company has his own view on the topic CRM. In addition, it could be stated that the concept of CRM is relevant for a lot of different areas like IT-Management, controlling, organization, marketing, and communication and should therefore be seen as a corporate strategy (Wolf 2002: 68). It affects the organization as a whole and should therefore provide direction to each department or employee that stays in contact with the customer.

According to the concept of seeing CRM as part of the business strategy, the definition of the Gartner Group could be regarded as helpful: “CRM is a customer-focused business strategy designed to optimize profitability, revenue and customer satisfaction.” (Gartner Group, 2002).

According to Shaw (2001: 23) customer relationship management also involves:

- “Measuring both inputs across all features including marketing, sales and service costs and outputs in terms of customer revenue, profit and value.
- Acquiring and continuously updating knowledge about customer needs, motivation and behavior over the lifetime of the relationship
- Applying customer knowledge to continuously improve performance through a process of learning from success and failures
- Integrating the activities of marketing, sales and service to achieve a common goal
- The implementation of appropriate systems to support customer knowledge, acquisition, sharing, and the measurement of CRM effectiveness
- Constantly flexing the balance between marketing, sales, and service inputs against changing customer needs to maximize profits.”

In contrast to these complex definitons of the term customer relationship managament, the definition of Garret (2000: 3) should be also quoted: “CRM means different things to many people, but at its heart it means becoming a customer-focused organization.”

Garret clearly reduces CRM to a customer-oriented corporate governance without considering the other dimensions of CRM.

Especially software and IT companies tend to define customer relationship management with a focus on technical dimensions. They often only concentrate on the technical information systems which are essential for a successful CRM, but are not the only requirements for creating a successful customer relationship management. An example for this kind of defintion could be the following: “CRM is a technology-driven solution to sales and marketing department. It focuses primarily on managing the information flow between the buyer and the seller, such as lead management and tele-marketing support, seeking efficiencies in sales-force costs.” (Schultz 2000: 11).

In order to find an appropriate definition which could serve for the purpose of the Bachelor’s Thesis, it is required to unify all the above mentioned dimensions without being to extensive or to narrow. A definition with a narrow focus would exclude some important aspects; a definition with an extensive focus would not be suitable in order to be able to draw a conclusion concerning the election of a CRM information system.

The Gartner Group identified three CRM segments which identify all the dimensions of customer relationship management: operational, analytical, and collaborative.

The operational CRM is the horizontal segment of a CRM and includes all the sales, marketing, and suport features which are required by a CRM. “Operational CRM covers customer-facing transactions from the internal company. Typical business features involving customer service, order management, invoice/billing, or sales and marketing automation and management are all part of this bandwidth on the spectrum.” (Greenberg 2004: 49).

The analytical CRM is the „capture, storage, extraction, processing, interpretation, and reporting of customer data to a user” (Greenberg 2004: 49). Companies can capture customer data from different sources and can interpret/analyze the data as needed. They are able to personalize the data in order to be able to treat their customers as individual as possible.

The third segment of CRM is called collaborative CRM and includes the communication centre to the customer. This could be a customer relationship program, a customer interaction centre in which communication channels such as the internet, e-mail or other channels are used to establish and maintain the contact with the customer.

In other words, it is any CRM function that provides a point of interaction between the customer and the company itself.

One of the most suitable definition is proposed by Liz Roche, the Vice President and Director of the Gartner Group in the year 2003: “Customer relationship management is not simply a technology tool or business process to ‘delight the customer’ or show how the organization ‘loves its customers’. CRM is ultimately about driving bottom-line revenue through proactive management of the customer life cycle. It is about applying the right CRM treatments to the right customer segment at the right time to produce business results. The difficulty is in determing what the right CRM treatments are and to what segments they should be applied. […] Each treatment, described as a three-layered CRM pattern called a “customer relationship anatomy” (CRA), will be differentiated based not just on what the customer wants […], but also on what the organization determines to be appropriate (based on the customer’s current period and future predicted value). And we note that value is defined as more than just profitability, as unprofitable current period customers may turn to be very profitable in the future.” (Greenberg 2004: 50).

In addition to the above mentioned definition of Liz Roche, I want to add a German defintion by Bartmann (2003: 7) which expresses all dimensions of customer relationship management.

“CRM ist ein ganzheitlicher strategischer Ansatz der kundenorientierten Ausrichtung von Unternehmen. Wesentliche Komponenten sind neben der Strategiedefinition im CRM die daraus resultierende Ausgestaltung der Kundenbeziehungen, die Konzeption von Organisation/Prozessen und der Einsatz von IT-Systemen/Technologien“[1] (Bartmann 2003: 7).

This definition is very close to the above required consideration of all dimensions of CRM.

2.1.2 Reasons for Using a CRM

In order to understand the evolution of customer relationship management it is required to take a look at the principles of relationship marketing where CRM stems from.As industries have matured, changes in the market demand and competitive intensity occured that have led to a shift from transaction marketing to relationship marketing (Payne 2006: 6).

As mentioned in 2.1.1, frameworks such as the marketing mix were developed in the 1950s in order to exploit market demand. The famous 4P model helped the company, if applied appropriately, to increased demand of the company’s products or services. The objective of this “transactional” approach to marketing was to develop strategies that optimize the marketing mix in order to maximize sales.

Especially in the last years of the twentieth century this marketing principles were increasingly being questioned. The market was extremely different from that of the 1950s and 1960s. Increased competition and matured markets have led to the fact that growth was low or non-existent which results in an increased pressure on corporate profitability.

Many customers were less responsive to the traditional marketing activities. The beginning of the globalization of markets, new sources of competition, and the emergence of new media and channels lead to a greater customer choice. Especially in this time, an innovative business thinking and behavior were asked to meet the challenges of this new competitive environment (Peelen 2005: 8).

In the early 1990s Philip Kotler proposed a new view of organizational performance and success based on relationships. “The traditional marketing understanding – based on the marketing mix and the 4Ps – is not replaced; it is repositioned in order to outline the importance of the relationship approach” (Payne 2006: 7):

“The consensus in […] business is growing: if […] companies are to compete successfully in domestic and global markets, they must engineer stronger bonds with their stakeholders, including customers, distributors, suppliers, employees, unions, governments and other critical players in the environment. Common practices such as whipsawing suppliers for better prices, dictating terms to distributors and treating employees as a cost rather than asset, must end. Companies must move from a short-term transaction-orientated goal to a long-term relationship-building goal“ (Kotler 1992: 45).

In many large industrial organizations, even today, marketing is still to be considered as a set of related but compartmentalized activities that are separate from another (Payne 2006: 8). With the introduction of the relationship marketing concept this perspective seems to change and even influenced the role of marketing in business. “In effect, marketing is given lead (but not sole) responsibility for strengthening the firm’s market performance” (Payne, 2006: 8).

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Figure 1: The Transition from Traditional to Relationship Marketing

The role of functionally based marketing is increasingly replaced by cross-functionally based marketing which means that marketing is seen as a cross-functional responsibility and not only as concern of the marketing department. Customer acquisition means paying attention in order to acquire new customers and extend the “lifetime value” of the customer through special strategies in order to assure the future flow of net profit.

The term market domains is in Payne’s sense defined as stakeholders which have to be taken into consideration in order to be able to develop relationships and to achieve long-term success in the final marketplace (Payne, 2006: 8). It is required to mention that you can only establish and optimize relationships with customers if you understand and manage relationships with other relevant stakeholders. Most businesses understand this and include their employees, which are responsible for their customers, in the stakeholder approach. However, there are other stakeholders which may also play an important role.

The increased importance of relationship marketing also led to an increasing demand for an efficient customer relationship management.

For many years, organizations have invested a lot of effort in order to understand the customers that buy their products. Despite this, many organizations, failed to understand their customers at even a basic level. According to Das (2007: 8) an organization should be able to answer questions such as:

- “What product did the customer last buy?
- When did they last phone?
- How did they undertake their last transaction? Website? E-Mail? Phone call? Fax?”

Das (2007: 9) stated that in reality many organizations do not even know who their customers are or, at least, how many they could call as their customers.

The task of finding out who your customers are, what they exactly want and providing it seems to be a task with difficulties.

In today’s business environment the providing of the product or service to the customer is not sufficient; the understanding and management of customer expectations is rather a key to success in order to be able to create satisfied customers.

In order to be able to reach this ultimate goal it is required to highlight the concept of customer knowledge.

Customer knowledge involves using the information which the organization has about the customer in order to develop a customer relationship.In order to be able to manage and create customer knowledge, the utilization of a customer relationship management system is essential.

2.1.3 Opportunities and Risks of CRM

The challenge of today is to combine information on customers which stems from different sources: Market research, databases and experiences from front and back-office employees have to be compiled in order to create an accurate, up-to-date, and consistent image of the customer (Peelen 2005: 93).

Incomplete, inaccurate, and outdated data will no help the organization to understand the customer.

According to Peelen (2005: 94) the quality of the customer database is expressed through the following formula:

“Quality customer database = Current x Complete x Correct x Unique

- Current: to what extent does the database depict a representation of the current reality?
- Complete: the completeness of the data concerns the availability of a value as well as the completeness thereof. When the customer database is designed, each item of data must be examined to determine to what extent it is necessary, strongly desired, or just ‘nice to have’. The last category is not essential for the business process especially if it later appears that this field is hardly ever filled in or maintained.
- Correct: the data is correct and, if applicable meet the standard or is valid within a collection of possible values.
- Unique: in principle, each customer should only appear once in the customer database.”

In some studies, the aspect of accessibility of the customer data is added to this list. The opportunities of customer relationship management depend to a great extent on the quality of the customer data which builds the base for successful customer knowledge.

However, some companies underestimate the wealth of customer knowledge. Many organizations store their customer knowledge in different databases but are not able to get the information together in order to create individual relationships and determine the lifetime value of the customers (Das 2007: 9). Integrating the customer knowledge into a customer relationship management could be difficult but it can also provide valuable insight into the customer’s behavioral patterns. Advanced data analysis techniques can produce statistically grounded behavioral models about the customers and could help the company to determine the following interesting aspects:

- The likelihood of purchase of specific product or service,
- The best next offer
- The probability of losing the customer

An intelligent data analysis with the use of an efficient customer relationship management could create the benefit of creating customer value and enhance the customer lifetime value.

The four steps in managing and creating customer value are illustrated in the following figure.

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Figure 2: The four Steps in Managing and Creating Customer Value

Stage 1: Define your Customers’ Actions

The first stage in creating customer value is to understand your customers. With the help of analyzing the existing data you can obtain information about segmentation, behavioral characteristics and profitability of your customers. The aim of the first step is to create a basic understanding of your customers.

Stage 2: Determine your Customers’ Expectations

Expectations of the customers, which could not be fulfilled by the company, are often the main cause that results in the loss of the customer. Understanding the needs and wants of your customers is essential for enduring relationships.

Stage 3: Design the Customer Value Model

The combined understanding of customers’ behavior, needs, and wants is essential in order to be able to design the customer value model. The customer value model helps the company to identify and estimate the customer lifetime value which is defined as the net present value of future cash flows associated with a customer.

Stage 4: Deliver Customer Value Model

The delivering of customer value model is performed through the help of a customer relationship management system. The integration of the system, processes, service providers, technology, and infrastructure as well as the creation of measurement systems should be performed in this stage in order to assure the delivery of the customer value model.

The description of the customer value model and the concept of customer lifetime value shows, that customer relationship management does not only mean to manage your customers. The opportunities of CRM are far broader – even after accepting that CRM is wider than sales, many organizations are still unaware of its full impact across the organization. Understanding the idea of customer value and of customer lifetime value as well as the importance of customer knowledge which results from a quality customer database is essential in order to be able to discover the whole opportunities of customer relationship management.

The resulting opportunities of a successful implemented and elaborated CRM solution could be determined according Schnauffer and Jung (2004: 7) into:

- Increased efficiency due to a better organization of the customer interfaces
- Improvement of the customer knowledge
- Winning of new customers due to an increased understanding of the customers’ requirements
- Image improvement through customer satisfaction

The implementation of a customer relationship management system could help the company to increase its performance; however, it is not a guarantee for increased business results.The introduction and usage of a customer relationship management system is often also accompanied by a certain level of risk. Thereby, the reasons of a potential failure of a CRM implementation could be due to various reasons. According to an IBM Global CRM Survey (IBM 2004: 1) 85 percent of the companies in America, Europe, and Asia are not feeling fully successful with CRM.

“Most importantly, CRM continues to hold great promise for companies, with over 50 percent of companies surveyed believing CRM is relevant to increasing performance from a shareholder value perspective, and 65 to 75 percent looking to CRM as important in delivering revenue growth through improved customer experiences, retaining and growing existing customer bases, increasing customer acquisition rates and influencing development of new product and services (IBM 2004: 1).”

CRM can deliver great value and improve the companies’ performance. However, in order to be able to fully realize this value companies have to improve the success, implementation phase, and have to avoid the main risk which could occur by introducing a CRM system.

One of the main risks when talking about CRM in general is the lack of the holistic of CRM. Many companies consider CRM as the sole responsibility of the marketing department (IBM 2004: 4). The lack of understanding of creating customer value and seeing CRM as a corporate business strategy often leads to the problem that the organization could not make full use out of the implemented CRM system.

According to Lüngen (2006: 29) do good solutions to a problem not guarantee a successful implementation. The Change Effectiveness Equation Q x A = E (Quality x Acceptance = Efficiency) does outline this in detail. If the employees are not willing to accept the change, the organization is not able to achieve its efficiency level.

Especially in the CRM industry many service providers are praising their CRM solutions as the best technology without considering the “real use” of the different systems. The new implemented technology makes things work faster but often at the expense of usage and integration. The transformation of the companies’ process into a CRM technology is the most challenging task when talking about the risk by the implementation of a customer relationship management system.

The technology is just technology – CRM is all about dealing with the technology in order to be able to get customer knowledge and use it to increase the companies’ performance. CRM technology cannot deal with these issues itself - it needs help. Companies have to think and decide how they want to deal with such issues and what processes have to be put in place in order to ensure that problems are dealt efficient, effective, and successful (Longbottom 2007: 3).

2.2 Small and Medium-Sized Enterprises

2.2.1 Definition

Micro, small, and medium-sized enterprises play a central role in the worldwide economy. They are a major source of entrepreneurial skills, innovation and employment. In the enlarged European Union of 25 countries, some 23 million SMEs provide around 75 million jobs and represent 99% of all enterprises (European Commission 2003: 42).

The European Commission established in the year 1996 a first common definition of small and medium-sized enterprises. On May 6, 2003 the Commission adopted a new recommendation of the definition in order to take account of economic developments since 1996. This definition entered into force legally on 1 January 2005 and will also apply to all the policies, programs and measures that the Commission operates for SMEs.

According to the legal recognition of the definition of the European Commission the definition will be applied according to the purpose of this Bachelor’s Thesis.

The European Commission (2003: 49) stated that companies are classified according to the following three criteria:

- Staff headcount,
- Annual turnover,
- Annual balance sheet.

On the basis of these three criteria, a company could be determined whether it is a micro, small or medium-sized enterprise.

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Figure 3: The Definition of Small and Medium-Sized Enterprises

The European Commission (2003: 12-28) proposes the following classification in order to determine whether the company is medium-sized, small or micro.

Micro enterprises are defined as enterprises which employ fewer than 10 persons and whose annual turnover or annual balance sheet total is limited to 2 million euro. Small enterprises are defined as enterprises which employ fewer than 50 persons and whose annual turnover or annual balance sheet total does not exceed 10 million euro. Medium-sized enterprises are according to Figure 4 limited to 250 employees and 50 million euro annual turnover or fewer than 43 million euro annual balance sheet amount.

Thereby, the staff headcount covers full-time, part-time and seasonal staff and includes the following:

- Employees
- Persons working for the enterprise being subordinated to it and considered to be employees under national law
- Partners engaged in a regular activity in the enterprise and benefiting from financial advantages from the company.

Apprentices or students engaged in vocational training are not included in the headcount as well as maternity or parental leave. The staff headcount is expressed, according to the definition of the European Commission (2003: 52), in annual work units (AWU). Anyone who worked full-time during the entire year counts as one unit. Part-time staff, seasonal workers and those who did not work the full year are treated as fractions of one unit.

The annual turnover is determined by calculating the income that the enterprise received during the last year from it sales and services after any rebates that have been paid out. The European Commission states that turnover should not include value added tax (VAT) or other indirect taxes.

The annual balance sheet total refers to the total value of the company’s main assets (European Commission 2003: 42-61).

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Figure 4: The Thresholds of Small and Medium-Sized Enterprises

Source: European Commission 2003: 14

2.2.2 CRM for Small and Medium-Sized Enterprises

Especially the CRM market for small and medium-sized enterprises is classified through a great variety of service providers. Their offer includes numerous niche products which are developed especially for small and medium-sized enterprises (Brendel 2002: 29).

The benefits of the latest technologies are not anymore reserved for only huge enterprises. Especially small to medium-sized enterprises require specific business strategies and procedures which should be reproduce able in the CRM software.

Small and medium-sized enterprises require a well-thought CRM strategy and technology that installs quickly with few technical resources. In addition, it should be easy to use and should offer possibilities of integration with existing applications. Scalability and reliability are essential; ideally combined with a low total cost of ownership.

According to Brendel (2002: 26) does a complete CRM solution have many advantages in comparison with different individual solutions which are often used by small and medium-sized enterprises according to financial reasons.

Individual solutions like a customer database and a product database do have the advantage that they are easy to handle and do not imply a great amount of implementation work.

However, is the implementation of a CRM system not only reserved to huge enterprises. Especially the requirements of the new challenging relationship marketing require small and medium-sized businesses to understand and implement the concept of customer relationship management in their business philosophy (Brendel 2002: 26).

The IBM research study “Doing CRM right: What it takes to be successful with CRM” (IBM 2004: 1) reveals that in America, Europe, and Asia 85 percent of small and medium-sized companies are not feeling fully successful with their implemented CRM solution. The IBM Global CRM Survey in the year 2004 asked 370 companies across industries to depict their experiences.

Especially small and medium-sized enterprises are far more attached by this problem. By now, many CEOs of SMEs fear the challenge of introducing and implementing a CRM solution. They experience the great amount of work and capital expenditures which are included in the introduction of a CRM and are in doubt about the amortization (Brendel 2002: 28).

Especially small and medium-sized enterprises are far more attached by the fear of threatening their existence by introducing a CRM than the global players.

In addition to this it could be also observed that the increasing technology based view on CRM by different service providers increased the fear of small and medium-sized enterprises to implement a CRM solution (Longbottom, C. 2007: 1).

They are simply not able to invest in the best and newest technology in order to promote their innovative business philosophy. Apart from the huge amount of costs, they are not focused on the image gain by implementing the new technology but rather on the cost-benefit ratio (Brendel 2002: 28). The result is crucial, the elegancy and modernity of the applied technology is far less important.

This special reaction on the topic CRM of small and medium-sized enterprises could be observed in many different industries. According to Brendel (2002: 29) are many small and medium-sized enterprises not aware of the possibilities of CRM or are simply afraid of introducing an expensive CRM solution. Brendel proposes especially for SMEs that CRM service provider do not change the whole process of the business by the implementation of a CRM. Primarily, two things should be established: the creation of a central customer database and the innovation of the sales department with special regard to mobile solutions in order to enhance efficiency.

This statement of Brendel (2002: 29) stands in contrast to the in 2.1.1 conducted approach of seeing CRM as a corporate strategy (Wolf 2002: 68). When following the advice of Brendel, do SMEs only apply the idea of contact management and computer-supported sales and do not imply all the dimensions of CRM outlined in 2.1.1.

However, does the idea of an improved customer-oriented organization due to integrated databases and modern technology attract many small and medium-sized enterprises.

But often is the implementation of a CRM system into a small- or medium sized enterprise limited according to the financial and human resources possibilities of the organization. Therefore, especially in small and medium-sized enterprises the implementation of new processes and new technology should be done carefully and step by step. Brendel proposes to start with the marketing and service department and to expand the activities when the implementation in the first phase is completed successfully (Brendel 200: 30).

3. Requirements of Customer Relationship Management

The explanations in 2.2.2 highlight that the implementation and the requirements of a CRM system for a small and medium-sized enterprise differ in a way from that of a huge organization. The following parts will reveal in detail what general requirements a CRM should fulfill and outline what are the basic components in order to be able to classify the system as “real” customer relationship management software. In the next step, the findings outlined in 2.2.2 will be picked up and it will be revealed what special features and characteristics a CRM for small and medium-sized enterprises should fulfill.

In the second part of this chapter, the requirements of a successful implementation of a customer relationship management system will be outlined. Special attention will be paid to the prerequisites for the implementation process and the steps necessary in order to ensure a successful implementation.

3.1 Criteria Based Requirements of CRM

3.1.1 Basic Components of a CRM System

In many situations the achievement of an efficient customer relationship management is to a extent dependent on the IT system. The system has to make it possible to develop customer knowledge in an efficient manner and to implement the idea and philosophy of the relationship marketing process outlined in 2.1.2.

In addition, it is very useful that the CRM system is able to be easy modified according to the different needs of a company.

Especially as soon as relationships have to be maintained with a larger group of customers, the use of IT becomes inevitable. This importance has also increased because the customer often prefers to communicate with the supplier through modern communication channels (Peelen 2005: 10).

In order to be able to depict a holistic approach of the different components of a customer relationship management architecture, we have to divide CRM into three different areas: analytical, operational and collaborative CRM (Zisper 2001: 36). The following figure depicts these three areas in an illustrative manner:

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Figure 5: Components of a CRM Information System

The figure above illustrates the holistic understanding of customer relationship management. A distinction is made between the analytical, operational, and collaborative CRM.

The following sub-chapters explain the analytical, operational, and collaborative component of CRM in detail. Analytical CRM

In order to be able to accomplish a successful and efficient customer relationship management, extensive customer information is required. Information systems which are collecting, saving, and analyzing these data are called analytical information systems or analytical CRM.

The basic function of analytical information systems is the transformation of data into information (Chamoni and Gluchowski 1998: 14).

Databases or data warehouses build the basis for every analytical CRM information system.

The main goal of data warehouse is to gather all the customer information from various sources and to provide them in a unique database in order to provide the necessary information to the operational and collaborative component of the CRM system. One can state, that the fundamental idea of providing information to the management is one of the objects of data warehouse. Data warehouse is defined as “a subject-oriented, integrated, non-volatile, time-variant collection of data organized to support management needs” (Kerner 2002: 122).

In the analytical component of CRM, data warehouse play the main part. In this step, data is turned into systematized information which leads to a better comprehension of business events and in the end to an increased customer knowledge (Rajola 2003: 26).

The data which is collected in the data warehouse could be also extracted and exported to various other software systems like the ERP-system or other external sources where the information could be used for other purposes.

Using business intelligence tools in the data analysis process, enables the company to divide the customers into homogeneous groups, building up profiles, and creating behavior models through evaluating a number of parameters such as loyalty, profitability, solvency, and measure the sensitivity to particular marketing actions. With the information out of the analytical CRM, these marketing actions could be effectively planned and monitored (Rajola 2003: 27).

In addition to the function of data warehouse, OLAP and data mining are playing a major role in the analytical CRM and serve as a function to analyze the customer data stored and collected in the data warehouse.

Online Analytical Processing (OLAP) is an advanced data reporting tool with graphical interfaces. The typical applications of OLAP are in business reporting for sales, marketing, management reporting, budgeting, forecasting, and financial reporting (Payne 2006: 254). OLAP and data mining tools are important elements of any technology solution used by the marketing department in order to analyze customers either as individuals or in product-based segments (Payne 2006: 238). The difference between OLAP and data mining could be best characterized when looking at the objectives:

The objective of data mining is more forward looking which means that with the help of data mining, the company is provided insights into the best ways to manage different customer groups. In contrast do OLAP reports have a more historical focus which means that they are summarizing the past data in order to draw conclusions from them. An OLAP analysis scrutinizes for example the sales performance of the last year and highlights trends. Another objective of OLAP is the function of visualizing the results of previous performed data mining analysis. It provides an easy-to-understand insight into data analysis and makes it accessible to a much wider range of people within the organization, helping them to identify trends, forecasts or even budget inefficiencies (Payne 2006: 255).

Generally spoken, do all analytical tools mentioned above perform the following: They are sorting data and extracting a meaning out of them in order to guide the development of management strategies and provide the management with the required information. They segment and predict the data and enable the organization to identify new customer groups and to facilitate in the end the exchange of information and knowledge between the organization and the customer (Rajola 2003: 28). Operational CRM

Nearly all customer relationship management systems on the market are providing a huge amount of various features in order to depict the CRM processes and to perform the tasks of a CRM. These features of the operational CRM could be classified into the subareas of marketing, sales, and service. Figure 5 also called them marketing automation, sales automation, and service automation.

The goal of marketing automation according to Hippner and Wilde (2006: 420) is the control and support of the marketing activities and the holistic organization of the customer data. The campaign management module builds the centre of marketing automation and identifies, through multi channel integration, all possible sales channels (Schmid, Bach & Österle 2000: 39).

In specific, marketing automation means: Performing the right offer to the right customer at the right time, in the right communication style, and through the right communication channel.

The required information in order to be able to perform an efficient campaign management derives from the previously performed analysis of the customer data. Insofar, does the realization of a successful campaign management depend to a great extent on the results achieved in the analytical CRM. In addition, the features of the collaborative part of the CRM are needed which importance will be revealed in the next chapter (Zisper 2001: 49).

A typical marketing campaign begins with the identification of appropriate customers which could be addressed by direct mailings with for example specified brochures about one special new product the company developed.After a certain amount of time, the company starts follow-up calls and invites the customers, who are interested, to the presentation or sends them additional information material. After giving the customer another certain amount of time for studying the additional information, further follow-up calls or direct mailings could be done with the overall goal to create a specified offer to the individual customer or the identified customer group (Dommershausen, Korb & Stahl 1999: 30).

Especially this approach ensures a successful and efficient administration and supply in form of a developed archive where all the information are saved and stored. Through the help of the analytical CRM all information about products, advertising material, telephone calls, emails, fax or other communication activities are provided in an efficient manner in the information system.

This specified information could be delivered directly to the employee who requires the information in order to perform their next step in the acquisition process.

The use of sales automation in the selling process is another sub-are of the organizational customer relationship management.

In the preparation phase, those customers are analyzed and selected who should be contacted in the future. In addition, special targets were defined which should be achieved by the contacting approach. The features of the CRM should help the company to make an efficient planning of the meetings in form of a shared calendar.

Like already mentioned in the marketing automation, does also the sales automation part require the information from the analytical CRM component.

With the use of analytical CRM it could for example be analyzed why a special offer did not match the requirements of the customer in the past and how the new offering should be adapted in order to achieve the desired result.

The term service automation describes the service area of the company and includes employees in the office work (call center etc.) as well as in the sales force. Especially this service area is responsible for the achievement of customer satisfaction.

Therefore, service automation is implemented in the operational CRM and has the task to assure an increased provision of the customers which in the end should lead to the overall goal of an increased customer satisfaction (Hippner and Wilde 2006: 421).

In conclusion, it could be stated that the overall goal of operational customer relationship management is defined in the improvement of the processes between the organization and the customer (Knöpp and Helling 2006: 20). Operational areas are, next to the campaign management, the customer service and the complaints management service.

In order to enhance customer satisfaction and to increase the service level of the organization, the operational part of the holistic CRM approach is indispensable. Collaborative CRM

The definition of collaborative CRM is discussed in various different approaches in the literature. According to Knöpp and Helling (2006: 25) does collaborative CRM just mean “a frictionless and consistent interaction between the company and the customer through various communication channels”.

However, this definition does not reveal the holistic approach of collaborative CRM but defines its main goal.

In addition to the definition of Knöpp and Helling (2006: 25), some professionals state that also the communication between the partners and suppliers is depicted in the collaborative part of CRM. The communication channels used in this concept could be for example: telephone, e-mail, letter, personal contact, fax, etc. (Rajola 2003: 28).

The goal of collaborative CRM is the efficient handling of the communication activities and the systematic transmission and allocation of consistent information to the customer.

Insofar does collaborative CRM also include the technical requirements in order to establish and assure the communication process between the company and the customer. This communication process is defined as the integration and interaction of the CRM software with the call center. In the literature this is defined as Computer Technology Integration (CTI). With the help of CTI, it is for example possible to display all relevant information of the customer to the employee when he/she phones and asks for a specific service (Schmieder and Nowotny 2002: 56-58).

Next to the CTI, Unified Messaging (UMS) is the next technological approach in order to establish a holistic communication platform in the collaborative CRM part. Unified Messaging is defined as the function of integrating different communication channels like telephone, fax, e-mail, and classical letters into one communication platform (Schmieder and Nowotny 2002: 62).


[1] CRM is a holisitic strategic approach to a customer-oriented enterprise. Main components are next to the definition of the CRM strategy, the resulting design of customer reltationships, the conception of processes, and the implementation of appropriate IT-systems and technologies. (Translated from the German into the English language by the author)


ISBN (eBook)
1.4 MB
Institution / Hochschule
Cologne Business School Köln – European Business Administration
2008 (Juli)
open source customer relationship management mittelstand marketing kundenmanagement



Titel: Open Source Customer Relationship Management Solutions