Roleof Direct Marketing in Customer Relationship Management
Thisstudy sought to examine the role of direct marketing in the customerrelationship management (CRM). Using a case study of Tesco PLC, aBritish multinational grocery and general merchandise retailer, thestudy has outline the role of direct marketing in CRM by relatingtheory to practice. The study undertakes extensive theoretical andempirical literature review on the direct marketing-CRM nexus toinvestigate how direct marketing influences CRM Evidence provided inthe study show that direct marketing enhances CRM through variousmechanisms such as provision of information on consumer needs,enabling the company to tailor products to customer needs(differentiation) and enhancing customer loyalty and satisfaction.The study has also established that integrating informationtechnology into the CRM as a marketing instrument (to form customerinformation systems (CIS)) leads to reduced response time to customerneeds thereby facilitating a better customer relationship management.The study proposes that in order to enhance CRM using directmarketing, it is important for firms to adopt the use of informationsystem and employ other customer relations best practices.
KeyWords: CustomerRelationship Management (CRM), Direct Marketing, Tesco
Background to the Topic 5
Statement of the Problem 6
Study Objectives 7
Literature Review 8
Theoretical Literature Review 8
The Generic Strategic Framework 8
The Value Discipline Model (VDM) 11
The Expectation Confirmation Theory (ECT) 12
The Product Life Cycle Theory (PLC) 14
The Ladder Loyalty Framework 16
Empirical Literature Review 17
Case Study: Tesco PLC 21
Discussion of Findings 23
Appendix 1: CRM Implementation Process 33
Appendix 2: Role of CRM in an Organizational Setting 34
Appendix 3: Benefits of IT in CRM 35
Appendix 4: The Tesco “Steering Wheel” 36
Globalization,competition and increasing tendencies towards the free enterprisehave complicated communication and made business a complexundertaking. Organizations have resorted to direct approaches toensure business survival and beating competition due to thiscomplexity. In the past few years, direct marketing has gained wideacceptability in this respect as a mechanism that delivers theintended message to the customers without any intervening media andis usually aimed at driving sales. Moreover, the channels of directmarketing used include direct mail, direct selling, couponing,telemarketing, email marketing and voicemail marketing (Chandrasekhar& Raj, 2014, p.26). These media have become important promotional tools but more soinstruments of structuring customer relationship. In particular, theapplication of direct marketing techniques in customer relationshipmanagement (CRM) has attracted a lot of research attention in recenttimes as researchers seek to investigate the direct marketing-CRMnexus because “Effectivecustomer relationship management (CRM) has become a strategicimperative for companies in virtually every business sector”(Park & Kim, 2003, p. 652). The significance of customerrelationship (which embodies customer satisfaction and customerloyalty) to the performance of a business and its long-term survivalcannot be mistaken. A healthy customer relationship, often manifestin customer-orientation by businesses results in increased businessproductivity, profitability and can form a basis for future businesssuccess even in times of cutthroat competition (Raab et al., 2012, p.13: Milovic, 2012, p. 341). Given that the overriding objective ofmost business organizations is to increase performance andproductivity as well as gain a competitive edge, using directmarketing in CRM comes in handy as an effective strategic managementconcept. This paper seeks to analyze the significance of directmarketing in the management of customer relationships (CRM) with anoverriding objective of investigating the specific mechanisms throughwhich direct marketing influences customer relationship management.
Backgroundto the Topic
Traditionally,marketing was treated as a peripheral business undertaking that onlybecame necessary at some specific points of a product life cycle. Theearliest signs of direct marketing were observed in 1880 in thedisguise of mailed flyers that had liberating effects on the19th-centurycustomers (RFB, 2015, n.p). Evolution of business environment throughglobalization and technology further shaped the use and growth ofdirect marketing as an instrument of customer relationship management(MSG, 2015, n.p). Over time, marketing has come to play a centralrole in the strategic business management and it is one of the mostsignificant factors that determining business success (Andersson etal., 2009, p. 8). The increased awareness of marketing is seen ashaving arisen from the fact that other business functions such aslogistics, accounting, human resource and finance would be useless ifdemand for an organization’s products was not created throughmarketing. Marketing is a fundamental part of the organizationalinfrastructure that is constantly evolving and developing. Moderntrends in direct marketing are seen to have their roots in the changeof scope in marketing in the 1950s when business began finding newproducts for their markets rather than finding markets for theirproducts in an organized paradigm (Achrol& Kotler, 2012, p. 35).According to Andersson et al. (2008), “Direct Marketing, CustomerRelationship Management (CRM) and other relationship marketingconcepts have been a topic of discussion for practitioners andacademicians in the later part of the 20thcentury and is widely claimed to be the future of marketing” (p.8). Customer relationship management has evolved over time to developa much stronger connection to marketing strategies and the choice ofthe marketing strategy adopted for CRM depends on the type oforganization. Direct marketing, however, has come to refer to theimplementation and strategic management of organizationalinteractions with customers.
Statementof the Problem
Thesignificance of a healthy customer relationship to an organizationcannot be underestimated. A healthy customer relationship not onlyincreases business performance and profitability but also eliminatesuncertainties governing future business operations. In the past fewdecades, organizations have invented several ways of managingcustomer relationships due to the overwhelming empirical evidenceshowing the invaluable evidence of healthy customer relationships tothe performance and survival of businesses. Healthy customerrelationships denoted by customer loyalty and customer satisfactionhave been found to drive business growth, financial and marketperformance, and ensure business survival (Reinartz, 2004, p. 293Gracaet al, 2015, p. 805 Morgan, 2012, p. 102 Chen, 2012, p. 206Williams & Naumann, 2011, p. 20).Moreover, the efficacy of using marketing strategies in customerrelationship management has also been widely investigated byempirical studies. To this end, researchers have found that the useof marketing strategies has a positive and significant relationshipwith the customer relationship management (Payne& Frow, 2005, p.167-176Gummesson, 2004, p. 136-148). However, a few studies have investigated the role of directmarketing in the management of customer relationships and providedresults espousing the specific mechanisms through which directmarketing influences customer relationships management. This study istherefore composed of two constructs that have been proven especiallygiven the conclusive empirical evidence on the significance ofmarketing and the role of customer relationship management onbusiness performance. Conducting an evidence-based study toinvestigate the role of direct marketing as a strategy for managingcustomer relationships ought to generate insights into the future ofmarketing and CRM especially at a time when competition and the freeenterprise have made business complicated and increased uncertainty.
Bythe end of the direct marketing-CRM nexus investigation, the studyshould be able to achieve the following objectives.
To determine the nature of the relationship between direct marketing and customer relationship management
To illustrate how direct marketing influences customer relationship management
To provide practical examples of direct marketing techniques used in management of customer relationships
To explain how the use of direct marketing in managing customer relationships can be improved
Essentially,the current study seeks to go over and above the previous empiricalstudies in the discipline by not only espousing the mechanismsthrough which direct marketing influence customer relationshipmanagement but also to provide case specific examples oforganizations employing this strategy and how it helps them managecustomer relationships. The results provided herein are expected tofill the knowledge gap on the mechanisms through which marketingaffects customer relationship management. Moreover, the study willgenerate invaluable insights by investigating the use of directmarketing as a strategy to manage customer relationships in anever-dynamic corporate world that the global market has come to be.The study will rely on an intensive literature review that follows inthe preceding section before undertaking case studies to examine thediscussed theory in the context of multinationals employing directmarketing to manage customer relationships.
Thissection of the report seeks to undertake an extensive review ofliterature materials on direct marketing, customer relationshipmanagement and studies investigating the relationship between the twoconcepts. This section is divided into two sections: theoreticalliterature review and empirical literature review.
Thispart reviews the theoretical models of customer relationshipmanagement and direct marketing to evaluate the expected outcomes ofdirect marketing on customer relationship management, albeit from atheoretical perspective. It is important to note at this point thatthe theories reviewed in this section were systematically selecteddue to their relevance to the endeavor of this study. The theoriesare described and their applicability and relevance to the endeavorof this study explained. The theories discussed here include theGeneric Strategic Framework, the Value Discipline Model, The ProductLife Cycle Theory, Expectation Disconfirmation Theory and The LoyaltyLadder Framework.
TheGeneric Strategic Framework
MichaelPorter developed this organizational framework of customerrelationship management (CRM) in 1980. The framework provides aconceptual description of the mechanics a company uses to pursuecompetitive advantage across a selected market scope. In this model,the competitive advantage of a firm is basically a function of thenature of the relationship that a firm has with its clients. Moreaptly, “value is what customers are willing to pay and superiorvalue stems from offering lower prices than competitors forequivalent benefits of providing unique benefits than more thanoffset a higher price” (Porter, 1985, p. 3). The model explains howorganizations can structure a healthy customer relationship usingthree strategies namely cost leadership, differentiation and focus asshown in figure 1.0 below.
Figure1.0:Generic Strategies of Porter’s Framework
Source:Porter (1985), p. 12.
Cost Leadership: According to this strategy, customer relationship begins with the prices offered by a firm and in this regard, a firm ought to serve at the lowest possible cost in the industry in which it exists. In order to achieve this dimension, firms should employ unique technology, employ cost effective production techniques and human resource best practices (Pokharel, 2011, p. 21). This specific dimension of the framework actually requires a firm to be a cost leader rather than a contender for that position. In classical economics, the essence of this dimension calls for a firm to exploit the proceeds of economies of scale and experience curve effects. Moreover implementing the strategy with regard to this dimension entails broadening the market share of a company and using strategies that create barriers to potential competitors entering the market. Alternatively, internal control mechanisms that ensure low cost for the organizational infrastructure encompassing procurement, finance, inventory, marketing and information technology. This strategy is particularly relevant to this paper since offering a low cost is the most effective way of endearing a business to customers and increasing demand for a company’s products (Boundless, n.p). However, such a strategy has the disadvantage of lower customer loyalty since customers are rational economic agents and are likely to switch to much lower prices if offered by a rival organization.
Differentiation: This dimension of the Generic Framework emphasizes the need for uniqueness in the market such that the uniqueness adopted is actually valuable for an organization’s customers. The areas of differentiation include marketing (for instance, an organization may resort to direct marketing), product, service or image and delivery. This strategy is particularly effective where the customers for whom a business wishes to manage relations with are not price-sensitive. The best scenario to employ this strategy is in circumstances where customers have particular needs that are not being catered for by competitors and a firm has the necessary resources to provide for such differentiated needs. Essentially, this strategy appeals to the customer-orientation aspect of an organization as a critical element of managing customer relations.
Focus Strategies: This dimension of the framework entails concentrating on a small segment of the market by product, geographical spread and buyer groups. The essence of this dimension is that by choosing to focus on a particular market segment a company is able to understand the market needs and tailor he products/ service to meet to achieve customer satisfaction. It is critical to observe that by its very nature, a focus strategy may necessitate either cost leadership or differentiation. For instance, is a company undertakes events marketing, that becomes a focused differentiation strategy.
Thistheory is very important to the study since it provides a frameworkcomplete with mechanisms of how organizations can structure therelationship with its customers therefore, provides a niche forsupport strategies such as direct marketing.
TheValue Discipline Model (VDM)
MichaelTreacy and Fred Wieserma developed this model of analyzing customerrelations management (CRM) in 1993. This is a model of structuringcustomer relations in a manner that helps organizations determinewhat they would want the customers to value them for (Treacy,M., & Wieserma, 1993, p. 84-93).The value Discipline Model is an important theory of marketing andcustomer relationship management especially because it provides threepositioning strategies that can be used to structure a relationshipbetween an organization and its customers: operational excellence,product leadership and customer intimacy (Pokharel, 2011, p. 23). According to the theory, firms can employ a customer intimacy focusto understand their clients and build closer relationships with thecustomers. A customer relationship strategy grounded on customerintimacy is essentially a relationship-oriented structure of CRM.Operational-oriented CRM focuses on cost reduction and total qualitymanagement. The diagram below shows a conceptual framework of themodel.
Figure2.0:Conceptual Framework of the Value Discipline Model
Source:Enterprise Advocate (2015)
Asshown in the diagram, product leadership is a key dimension of thisframework and is important since it is what ultimately appeals to theclients. The underlying mechanics behind this dimension of VDM isthat it encourages innovation and recognizes the success and futureprospects of an organization. Moreover, the product aspect propagatesa risk-oriented management style and identifies a necessity toeducate customers on new products in the market (Enterprise Advocate,2015, n.p). This theory is significant to this paper because itidentifies product leadership as a key feature of customer relationsmanagement, which implies that it can be used to assess the impact of(direct) marketing strategies on CRM, a key objective of this paper.
TheExpectation Confirmation Theory (ECT)
RichardOliver first proposed this theory in 1977 and subsequently developedit in 1980. This theory proposes that customer satisfaction (anelement of CRM) is usually achieved depending on the reconciliationof expectations and reality. This theory proposes that fororganizations to inspire customer satisfaction and subsequentlystructure a CRM, it is important that customer expectations do notsupersede the reality of the firm’s product (Lin et al., 209, p.315-326Olshavsky & Miller, 1972).As shown in the diagram below, this theory consists of fourinterrelated theoretical constructs: expectation, perceivedperformance, disconfirmation and satisfaction. Expectationsreferto the attributes that a customer anticipates with a specificproduct, service or technology (reality). Such anticipationsinfluence both the performance and disconfirmation aspects. Perceivedperformancerefers to the customers’ perceptions about the actual performanceor significance of a product. Disconfirmation of belief essentiallyrefers to the judgments made by customers concerning the actualproduct in light of the already formed expectations. The diagrambelow shows the conceptual framework of the theory.
Figure3.0:Expectation Confirmation Theory
Finally,satisfaction refers to the degree to which a client is contented withthe product. It is the net impact resulting from the reconciliationof expectations and the reality of the product. The extent ofcustomer satisfaction and knowledge of the product is what determinesthe relationship between an organization and its customers (Mithas etal., 2005, p. 201). Intuitively, this theory is a caution againstusing certain sales and marketing strategies to structure customerrelations especially those that might raise customer expectations waybeyond the actual attributes of an organization’s products. This iswhy the theory is relevant to a study examining the role of directmarketing on customer relationship management.
TheProduct Life Cycle Theory (PLC)
Thisis one of the most popular theories of marketing. Raymond Vernondeveloped the Product Life Cycle (PLC) Theory in response to thefailure of Hecksher-Ohlin’s model to explain the perceived patternof international trade. The PLC framework divides the marketing of aproduct into four distinct stages namely introduction, growth,maturity and decline. In some instances, especially involvinginternational trade, growth and introduction are usually merged intoa single stage. The diagram below shows the stages of the PLC.
Figure4.0:The Product Life Cycle Theory
Source:MarketingMix Hub (2015)
Asshown in the diagram, the stages are sequential and intricatelyrelated such that one leads to the other. The theory proposes thatcompanies should customize their products to customer needs duringthe introductionphase(Chron, 2015, n.p). However, during the growthstage,the companies focus on marketing shift to broadening the marketshare, building customer loyalty and strengthening the supply chainas a specific strategy to keep market competition in check. Thegrowth stage is what drives a product to the maturitystagein which a company’s products command a large market share andthere is very little differentiation in the market. Finally, the lawof diminishing returns sets in and there can be no further marketingor product differentiation that can be undertaken by firms toincrease sales or if there exists any, they are economicallyprohibitive. The PLC theory is mostly applicable to multinationalcompanies, especially when entering new markets, especially throughdistributors (Restucciaet al., 2015, n.p).This theory is significant to the endeavor of this study since itlays emphasis on customer-orientation, marketing strategies anddifferentiation all of which are central concepts of customerrelationship management. Nonetheless, the theory has gained widerapplication because “publicperception of Product Lifecycle Management (PLM) has been driven byan extended marketing campaign on the part of many PLM interestgroups that see PLM as an important business opportunity”(Cao & Folan, 2012p. 3). Examining the application of the PLCtheory in this paper, therefore, entails investigating the use ofdirect marketing as a strategy to tailor products to customer needsand its consequent effects on customer relationship management in thePLC framework. Additionally, the PLC theory can itself be used as astrategic marketing planning tool (Baker& Cronin, 2015, p. 345-349).
TheLadder Loyalty Framework
Neiland Murray Raphael proposed this framework of (direct) marketing in1999. This framework provides a trivial approach to comprehending andstructuring a customer relations management through RelationshipMarketing (CEO, 2015, n.p), emphasizing the role of the marketingdepartments in organizations in viewing every individual as apotential business partner. The theory provides a six-stage procedurethat business can use to create and strengthen customerrelationships. According to Uncles et al. (2003), customer loyaltyprograms are designed in conformant to the ladder of loyalty, whichstructures customer relationships with an organization (294-316). The diagram below shows the structure of the Ladder LoyaltyFramework.
Figure5.0: TheLadder Loyalty Framework
Source:Study Marketing (2015) “Ladder of Loyalty.”
Asshown in the diagram above, the framework is divided into two maincategories depending on the emphasis of a marketing strategy indeveloping a CRM program. The ladder of loyalty begins with aprospective client who essentially is any person to whom a businesspitches a company product. A primal interest in the product is whatmakes the individual a prospectand businesses should be very enthusiastic about converting thisinitial interest into sales. A customerpurchases the products of an organization for the very first time andorganizations make the best of this opportunity to create arepurchase behavior. A clientis a customer who returns to the business to purchase, ostensibly dueto the first experience. Supporter (or member) is a client who hasdeveloped some degree of emotional attachment to an organization andits products. An advocateisa member who recommends the products of an organization to potentialcustomers and finally, a partner is an advocate who willinglyundertakes to promote a business on an organization`s behalf. Thistheory is more practical and applies to all organizations regardlessof size. It is mostly important to the study since the “loyaltyladder” relies on organizations pitching an idea to a specificclient (thus direct marketing), and is complete with an array ofstages of managing a created customer relationship.
Thefields of marketing and CRM are old but central concepts inorganizational science and it is clear that the theory in the twofields by far exceeds the empirical literature. Nonetheless, numerousstudies have been conducted to investigate the role of directmarketing on customer relationship management (CRM). Empiricalstudies have stated that the two concepts of marketing and CRM arerelated in such a manner that CRM should be the essence of marketing.More aptly, “marketing is to establish, maintain and enhancerelationship with customers and other partners, at a profit, so thatthe objectives of the parties involved are met, it is achieved by amutual exchange and fulfillment of promises” (p. 12). In anotherphenomenal study, Rust & Verhoef (2005) noted that CRM onlydiffers from the traditional direct marketing in the sense that CRMinvolves contacting customers using a variety of media and that “CRMmarketing problem typically involves a mix of marketing interventions(e.g., direct mail, Internet contacts, personal selling contacts andtelephone contacts”(p. 477). There is a renewed research interest in investigating theimpact of technology and globalization on the direct marketing-CRMnexus. Technology, in particular, has facilitated the creation ofcustomer information systems (CIS) that have become a critical mediumin undertaking direct marketing, which has enhanced the customerrelationship management since it facilitates the storage, trackingand retrieval of customer information (Park and Kim, 2003, p. 652). Further studies into the role of direct marketing in CRM and theoverall contribution to organizational performance has also beeninvestigated with studies finding positive and significant impacts ofdirect marketing and CRM on organizational performance. Directmarketing, which has been considered as a fundamental aspect of CRM,leads to an increased “conceptual and objective companyperformance” (Reinartz, 2004, p. 293).
Directmarketing has been espoused by researchers as being fundamental inmanaging customer relations by virtue of its ability to facilitatethe acquisition of qualitative and quantitative information fromcustomers that can be used in CRM decision-making processes.According to Kumar (2005), the “firms use different surrogatemeasures of customer value to prioritize their customers and todifferentially invest in them” (p. 61). Use of informationtechnology to collect customer data has also come across in empiricalstudies as a critical aspect of the direct marketing-CRM nexus. Morespecifically, empirical studies contend that “customerrelationship management is based on customer`s data and isfacilitated by usage of IT. In fact, CRM is a modern and developedtool for data mining of customer`s data which is supported by usingvarious communication points in the system and create a comprehensivepoint of view from customers”(Bahrami et al., 2012, p. 61). Researchers have as much beeninterested in the use of social media (as a contemporary form ofdirect marketing) in customer relationship management. Literaturematerials investigating the use of social media in CRM, a conceptthat has come to be known as Social Customer Relationship Management(SCRM), facilitates CRM by providing the necessary insight that canlead to customer-centric innovation (See Appendix 3 for the role ofIT in an organizational setting). Empirical results pertaining tothis finding show that “theknowledge gained on customer behavior, attitudes and mood will helpdrive benefits throughout the value chain, impacting on suppliers(for example, forecasting demand) and intermediaries (for example,shaping in-store promotions)” (Woodcock et al, 2011, p. 50).Additionally, empirical studies show that the use of direct marketingin relationship management involves appealing to some other importantconcepts of product promotion and organizational public relationsconstructs. Quality and customer service are some of the mostimportant factors that need to be integrated with marketing in orderto yield the best form of organizational relationship management(Christopher et al., 2013, p. 148). Moreover, CRM itself is acomponent of the broader organizational communication system and canfacilitate the communicative needs of a firm through the integrationof marketing (direct marketing), information technology and servicedelivery (Bahrami et al., 2012, p. 63). Studies that are more recentreveal a clear trend towards the integration of emerging technologyinto marketing and by extension, CRM. It is believed that in directmarketing and CRM, “social influence is likely to play a rolebecause the decision to adopt a high-involvement product requiresextensive information gathering from various sources” (Risselada etal., 2014, p. 52).
Real-timeCRMis a concept that recent empirical studies have rigorouslyinvestigated especially due to the business dynamism and theinfluence of technology. Such studies posit that in the contemporarycorporate world, customer relationships are managed using technologyand a healthier CRM is denoted by a quick response to customer needs.According to Chan (2015), real-time CRM has become a critical elementfor organizations that cherish immediate customer experience and thatsuch a system of operations must take into account the three tenetsof CRM: operational, analytical and collaborative CRM (p. 116). Theessence of such an empirical outcome to this study is that itproposes an integrative investigation of the role played by directmarketing on the CRM along the specified constructs of relationshipmanagement. The recent studies, however, remain upbeat concerning theprospects of direct marketing and CRM noting that organizations arelikely to employ a variety of approaches to ensure a healthy customerrelationship. The studies conclude, “Given the obvious financialbenefits of and the widely acknowledged importance of customerloyalty, most CRM practices are typically directed at retaining allcustomers of the firm” (Shah, 2015, p. 201). Researchersdemonstrate that the significance of direct marketing in CRM has ledto the need to develop a mobile phone marketing system that willenable management of customer relations by organizations much easier.Using the existing literature on mobile commerce and marketingcommunications studies, it comes out as critical for organizationsfirms to integrate the mobile marketing efforts into their CRMstructure. Moreover, “customer relationship management (CRM) shouldbe seen as a specific communications tool in mobile marketingcontext” (Venkatesh, 2015, p. 1186). In summary, empiricalliterature confirms that direct marketing greatly influences CRMespecially when it is integrated with information technology.Additionally, it comes out clearly that firms have to integrateseveral concepts of operations management in order to enhance CRM.
CaseStudy: Tesco PLC
Thissection undertakes a case study of Tesco PLC, a British multinationalgrocery and general merchandise retailer dedicated to “providingthe most compelling offers to customers” (Tesco, 2015, n.p). Thecompany was selected for this study since it has a large customerbase and employs a variety of direct marketing techniques as a formof CRM. An examination of the impact of direct marketing techniquesemployed in CRM will enable the assessment of the discussed theoriesin practice. One of the most prominent forms of direct marketingemployed by the multinational is the TescoClubCard Scheme.This is described as one of the world’s most successful loyaltyschemes (Expert Market, 2015, n.p) that enables Tesco PLC tostructure the desired relationship with millions of its customersaround the world. This scheme enables Tesco to provide holisticservices to its customers through a partnership with other companieslike the hotel, car and gas providing an incentive for cardholders toearn marginal points. The scheme caters for different market segmentsacross age and geographical coverage some of which include TescoBaby, World of Wine Club, Tesco Kids, Toddler Club and Tesco HealthyLiving Club. One of the most important features of the TescoClubCard Scheme asa form of direct marketing is that it “allows for targetedcommunication, thus, there are over four million variations of itsquarterly mailing to ensure that discounts and offers are tailoredspecifically for the customer” (Expert Market, 2015, n.p). TheTescoClubCard Scheme isemployed effectively by the company to manage customer relationssince it acts as “a way of giving customers back after shoppingwith Tesco” (Tesco ClubCard, 2015, n.p). Using the scheme,“insights gained from the analysis of shopping patterns were ableto be actioned into marketing and retail programs which encouragedcustomer satisfaction and loyalty to Tesco” (Expert Market, 2015,n.p).
Anothereffective form of direct marketing adopted by the multinational isthe use of the CommentCards.The company uses these cards to solicit for the customer suggestionsand investigate the customer need in order to respond promptly. Thecompany holds Customer Question Time sessions at least twice annuallyso that the company can evaluate its performance to customers on thedimensions of product quality, price, and service and customerinvolvement. The following quote extracted from the company websiteillustrates this point better.
“Customersregularly tell us about the great service that our colleagues provideand often tell us which member of the Tesco team has servedthem. This gives us the chance to acknowledge these colleagues.On occasions, they also tell us when we get it wrong and this givesus the chance to support those colleagues who need additional servicetraining.”– Tesco (2015), HowWe Communicate Together: Comment Cards
Tesco,therefore, employs the use of comment cards to obtain individualcustomer feedback and ensures feedback to clients through the websitedesigned for customer interactions. The insights generated throughuse of TescoClubCardand CommentCard, asdirect marketing tools has yielded practical results to the giantretailer. The use of the techniques has led to the production of foodvarieties for healthy living (400 products that are low in sodium andfat), “Free From” products (people with special healthconditions), and Healthy Kids Snacks and Organic product lines(Expert Market, 2015, n.p). Additionally, the company’s CRM isintegrated into the operational element of the business, which isreferred to as the “steering wheel” (see Appendix 4) wherecustomer expectations and service provision by the company iscompared to ensure that all customer needs are met (Tesco, 2015,n.p). Social media also provides the company with a platform to reachmore customers, especially Facebook and Twitter where the company hasmanaged to reach many clients directly through posting onlineadvertisements and replying to customer needs on such platforms.Unique to other organizations, Tesco holds “colleague forums” tofacilitate employee deliberations on how best they can serve theclients efficiently.
Thissection essentially seeks to reconcile theory with practice asobserved in the context of one of the biggest retail stores in theworld, Tesco PLC. The most common theoretical prescription oftheories in the direct marketing-CRM nexus is that direct marketingleads to improvement in customer relations management. Moreover,empirical studies reviewed in the earlier part of this study alsoconfirmed that direct marketing indeed had positive and significantimpacts of a firm’s CRM. The case study of Tesco has confirmed bothfindings by outlining the visible products that resulted frominsights generated from the use of TescoClubCard andCommentCards.Concerning the specific mechanism through which direct marketinginfluences CRM, theory and empirical literature materials stated thatdirect marketing provides information required to structure a CRM.This outcome has also been confirmed in the case study in which theinformation provided by customers through the Tesco CommentCardsand information from the ColleagueForumsprovides the company with not only customer needs but also thefunctional malpractices of the company, especially from the customerperspective. The structural and functional adjustment made by thecompany is what actually improves the management of customerrelationship at Tesco. Some of the most recent literature materialsreviewed under the empirical literature materials section emphasizedthe role of technology in facilitating direct marketing and byextension, CRM. Moreover, the literature materials recognized theefficacy of social customer relations management (SCRM) as anintegration of direct marketing through social media and CRM. TescoPLC uses social media platforms to pass information to customersespecially regarding new products, stores or company events, whichenables it to maintain customer relationships through the provisionof information. Finally, theory lays a lot of emphasis on the use ofmarket segmentation, product differentiation and an appeal to theorganizational constructs of CRM (operational, analytical andcollaborative CRM). Tesco has an integrated system that addressesthis theoretical prescription and is referred to as the Tescosteering wheel (See Appendix 4).
Thestudy sought to examine the role of direct marketing in the customerrelationship management. Using a case study of Tesco PLC, a Britishmultinational grocery and general merchandise retailer, the study hasoutline the role of direct marketing in CRM by relating theory topractice, albeit in the context of Tesco PLC. Direct marketingenhances CRM through various mechanisms such as the provision ofinformation on consumer needs, enabling the company to tailorproducts to customer needs (differentiation) and enhancing customerloyalty and satisfaction. The study has also established thatintegrating information technology into the CRM as a marketinginstrument (to form customer information systems (CIS)) leads toreduced response time to customer needs thereby facilitating a bettercustomer relationship management. Moreover, CIS makes it possible tostore, track and retrieve customer information thereby making itpossible to structure an evidence-based CRM. Social CustomerRelations Management (SCRM) is as much an important channel thatenables an organization to market its products directly to multitudesand is, therefore, an important CRM concept. Therefore, this studyproposes that to increase the outlined positive impacts of directmarketing on CRM, organizations must use technology, social media,focus on employee welfare and use data and empirical information asthe basis for CRM structural adjustments.
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Appendix1: CRM Implementation Process
Source:Tavana et al (2013), p. 67
Appendix2: Role of CRM in an Organizational Setting
Source:Study Marketing (2015)
Appendix3: Benefits of IT in CRM
Source:Barhami et al (2012), p. 60
Appendix4: The Tesco “Steering Wheel”
Source:Tesco (2015), “How We Communicate”