Micro sized retailers’ usage of e-CRM
A study about how far micro sized retailers have implemented e-CRM and exploration of what factors can describe their e-CRM adoption.
Author(s): Fredrik Fagerström
Degree of Master in Science in Business and Economics Linda Sjögren
Degree of Master in Science in Business and Economics
Tutor: Frederic Bill
Examiner: Professor Mosad Zineldin Subject: Business in Administration
and Marketing
Level and semester: Master thesis, Spring - 2012
Letter of gratitude
We would like to start with addressing our enormous gratitude to our tutor Frederic Bill for invaluable discussion and tips contributing to our paper and all of its areas and also topics not concerning our paper, but still thoughtful, inspiring and motivating.
We would also like to address a big thanks to all participating companies of the research and wish them a future of luck and good business, especially good luck with their development of their e-‐CRM adoption on their web sites.
To all of our opponents, we would like to address a big gratitude for your insightful analysis of and tips for the process of completing our research, thank you.
A big thanks is also addressed to our examiner, Mosad Zineldin, for interesting and motivating seminars.
Fredrik Fagerström Linda Sjögren
2012-‐05-‐25
Abstract
Title: Micro sized retailers usage of e-‐CRM: A study about how far micro sized retailers have implemented e-‐CRM and exploration of what factors can describe the e-‐CRM adoption
Course code: 4FE03E
Authors: Fredrik Fagerström 880107 Linda Sjögren 880805
Research question: The research explores what factors can explain e-‐CRM adoption of micro sized retailers through 6 hypotheses, derived from literature review.
Purpose: The purpose of this study is to describe how far micro sized retailers have implemented e-‐CRM and explore what factors can describe their e-‐CRM adoption.
Methodology: The result of the study consists of the participation of 137 micro sized retailers on the Swedish market. A quantitative questionnaire has been developed out of theories and qualitative pilot-‐studies.
Conclusion: This research can conclude that micro sized retailers on the Swedish market have, in average, implemented 5 e-‐CRM features per company.
This equals a 12% usage of the total e-‐CRM features explored for this research.
The one proved factor that can describe how retailers have adopted e-‐CRM is their profitability rate. Companies with a profitability rate below market average are more likely to have implemented more e-‐CRM features than companies with higher profit rate than market average. The explanation to this might be that companies with a low profit rate implement e-‐CRM as a tool to cure their low profit rate, since e-‐CRM is supposed to bring benefits as lower costs and increased sales with the purpose to increase their profit in the future.
Key words; e-‐CRM, growth orientation, micro sized companies, retailers
Table of Contents
1 Introduction ... 1
1.1 Background ... 1
1.2 Problem discussion ... 2
1.3 Purpose ... 5
1.4 Hypotheses ... 5
1.5 Delimitations ... 6
2 Theory ... 7
2.1 Definition of the retail industry ... 7
2.2 Definition of Micro-‐ and Small enterprises ... 7
2.3 CRM ... 7
2.3.1 CRM in SMEs ... 9
2.4 E-‐CRM ... 10
2.4.1 E-‐CRM in SMEs and micro sized enterprises ... 14
2.5 Growth intentions ... 15
2.6 Deriving at hypothesis ... 16
3 Methodology ... 20
3.1 Scientific approach ... 20
3.2 Scientific procedure ... 22
3.3 Gathering of data ... 23
3.3.1 Triangulation ... 23
3.3.2 Population and sample ... 24
3.3.3 Qualitative approach ... 26
3.3.4 Quantitative approach ... 26
3.3.5 Pilot study ... 27
3.3.6 Operationalization ... 28
3.4 Interpretation of data ... 34
3.5 Criteria of measurements ... 35
4 Empiric results ... 37
4.1 E-‐CRM features usage ... 37
4.2 Description of empirical material ... 39
4.3 Results ... 46
5 Analysis ... 52
5.1 Overall analysis ... 57
6 Conclusion ... 60
7 Further research and self-‐criticism ... 61
References ... 63
Articles ... 63
Books ... 67
Internet sources ... 68 Appendix
Appendix 1 E-‐CRM features description
Appendix 2 Additional features with references Appendix 3 Sample frame
Appendix 4 Questionnaire
Appendix 5 Full-‐length operationalization Appendix 6 Empirical results
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1 Introduction
The introduction chapter will give the reader an insight to the subject of the research by describing the background followed by a problem discussion, which leads the reader to the purpose of the research.
1.1 Background
Between the years of 2003 and 2010 the number of persons with Internet access through a personal computer at home in Sweden has more than doubled and reached in 2010 6,3 millions of people having Internet access at home (www.scb.se). This rapid development of Internet and the explosion of interest among executives to implement Customer Relationship Management, CRM, systems made born to an offspring to CRM, named e-‐CRM (Harrigan et al., 2010 and Bhanu and Magiswary, 2010). CRM systems, Customer Relationship Management, emerged as a software tool to perform relationship marketing, RM, acitivities (Payne, 2006 and Alshawi et al., 2009). Relationship marketing is said by some to be the new paradigm of marketing replacing transactional marketing, TM, and some state it’s just a rediscovery or a reshaped old paradigm (Harrigan et al., 2010, Zinelding and Philpsson, 2007, Jagdish and Parwatiyar, 1995 and Grönroos, 1994). Either if RM has replaced TM or not, RM is defined as to be a business strategy focusing on establishing and maintaining relationships between sellers, buyers and other stakeholders and these relationships are successful and achieved by a mutual exchange and fulfilment of promises (Grönroos, 1994). Through this business strategy and the principles of RM, CRM emerged and suggests investing in business intelligence technology, which enables a long-‐term customer focused relationships strategy (Alshawi et a., 2009). The software used enables a company to identify, acquire, serve and retain profitable customers through interactions (Padmanabhan and Tuzhilin, 2003), and by collecting and saving customer information with these software tools (Payne and Frow, 2005). The interest and utilization of CRM systems increased rapidly during the 1990’s and the development of Internet has, as said, made born to an Internet oriented system named e-‐CRM (Boulding et al., 2005, Bhanu and Magiswary, 2010).
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E-‐CRM is described with the same objectives as CRM but with the use of Internet based technology (Harrigan et al., 2010). Therefor e-‐CRM, in contrast to CRM, refers to the marketing activities, tools and techniques delivered over the Internet. The aim of the use is to locate, build and improve long-‐term customer relationships, as in CRM but with the use of technology on the Internet (Lee-‐
Kelley et al., 2003). Through the e-‐CRM tools a company can meet and interact with a customer in all interaction channel in a consistent way (Pan and Lee, 2003). The tools integrate, captures and distribute all data from a web site and spreads it through the entire company (Pan and Lee, 2003). The data collected and managed is useful while taking marketing decisions and the information management increases the organisations flexibility, efficiency, integration, communication, collaboration and, might even foster a culture of innovation and creativity (Du Plessis and Boon, 2004). Richie and Brindley (2005) points out the importance of face-‐to-‐face contact to establish relationships, but emphasize the importance and usefulness of electronic methods to maintain these relationships.
1.2 Problem discussion
There are 1,1 million enterprises in Sweden and of these only 0,09% are large sized while 21% are micro sized (1 to 9 employees) (www.ekonomifakta.se).
This means that these companies have a major role in the national economy, still not much room are made for micro sized companies in the academic research of e-‐CRM. The micro sized companies are often researched together with small and medium sized companies in a cluster called SME, even tough the sizes differ a lot.
The small sized companies refer to companies with 10 to 49 employees and the medium sized by having 50 to 250 employees (www.ekonomifakta.se). SMEs, including micro sized companies, have characteristics that differentiate their operating manners compared to larger companies. The deficiencies can be described as a lack of resources, expertise and impact on surrounding environment (Harrigan et al., 2010). SMEs are also characterised by their close relationship to their customers, which they manage with a flexibility and adaptability (Harrigan et al., 2010). This is the competitive advantage of SMEs towards larger companies, for whom these close relationships are expensive to
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manage with face-‐to-‐face contact as SMEs do (Richite and Brindley, 2005). The nature of SMEs daily operations, close relationships and face-‐to-‐face contact, results in that they perform CRM activities intuitively and through personal networking (Harrigan et al., 2010). SMEs must maintain a high level of communication with their customer and at the same time acquire and manage information on their customers in order to meet their needs and stay competitive in the market (Keh et al., 2001). This is especially true for retailers, who, according to Triversity (2001), always have had the consumer in focus and these close relationships are of vital importance to their value creation.
In studies where research has been done of special characteristics of SMEs with high growth it has been claimed that active management of product and market development is the characteristic that mostly distinguish SMEs with high growth from the ones with poorer growth pace (Smallbone et al., 1995). High growth firms actively respond to new market opportunities, which include finding new products or services to offer existing customers (Smallbone et al., 1995). In general small firms are more resistant to technological changes than larger firms, and openness to implementing changes is found to have a relationship to growth orientation (Gray, 2002). If the firm is growth oriented there is a stronger propensity that it implement technological changes, than if the objectives are not focused on growth but only on survival or other (Gray, 2002). The most important factor to achieve high growth in companies, according to Smallbone et.
al., (1995) is that the leader or manager of the company is fully committed to achieve growth, but Gray (2002) has found a negative relationship between age of owner-‐manager and growth orientation.
The most important marketing tool in SMEs is the communication with customers that tends to be constant, informal and open with the purpose to create mutual value (Harrigan, et al., 2010). A proper implementation for e–CRM can be of a great success for companies, but according to Bhanu and Magiswary (2010), 65% of all e-‐CRM projects fails due to lack of understanding. Ryals &
Payne (2001) have recognized that e-‐CRM is often mistaken as to be an exclusive technological initiative and not as a complement to the ordinary face-‐to-‐face
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customer relationship. Padmanabhan and Tuzhilin (2003) state that e-‐CRM system easily can fail to build good relationship with customers due to insufficient implementation. This can lead to unsatisfied customers and in worst scenario, the relationship with customers can break. Harrigan et al., (2010), also argues that the challenges of e-‐CRM are greater in SMEs then they are for large organizations due to fewer financial resources, lower expertise and limited management skills. Although, the potential benefits of implementing e-‐CRM in SMEs are significant when succeeding. Adebanjo (2008) claims that process improvement, business cost reduction, improved customer perception and increased sales are some of the benefits, and also as stated before the importance of valuable data when taking marketing decisions (Du Plessis and Boon, 2004).
The earlier stated development of Internet that resulted in the emergence of e-‐
CRM has also changed the prediction toward customer services where e-‐CRM can be a great tool to maintain these services (Ashouri and Faed, 2010).
Feinberg et al., (2002), argues that retailers don´t understand the potential and importance with e-‐CRM which, in todays market, is necessary to fulfil their customer needs. Chen et al., (2011) have identified that e-‐CRM can be used to identify customer preferences and their buying behaviour, which is useful to stay competitive on the markets.
As said, not much research have been executed about e-‐CRM and the level of implementation where the differences are respected between the SME sizes. But as presented above the sizes differ a lot and these figures logically suggest that differentiation should be made in between the company sizes. Due to that, this research will investigate how e-‐CRM is implemented in micro sized companies on the Swedish market of retailing. The research will use a 25-‐feature model found by Feinberg et al., (2002) and used by others. Feinberg et al. (2002) also found 16 more features but only some of these features will be used in the research since the literature where they are found is not revealed and only these few are found by other authors and fit to the objectives of e-‐CRM. In total, 18 additional features will be used to the 25 features discovered by Feinberg et al.
provided by the literature and other authors after the findings of Feinberg et al.
in 2002. The 43 features will be used to index e-‐CRM performance for micro
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sixed companies on the Swedish market of retailing. As found by previous studies it is also shown that small firms who actively respond to new market opportunities by developing new products or services are more likely to be high growth firms (Smallbone et al. 1995). Also the fact that firms, whose leader or manager are committed to growth are more likely to achieve it (Smallbone et al., 1995) arises an interesting question, whether firms that are growth oriented have adopted e-‐CRM more thoroughly.
1.3 Purpose
The purpose of this study is to describe how far micro sized retailers have implemented e-‐CRM and explore what factors can describe their e-‐CRM adoption.
1.4 Hypotheses
In this chapter six hypothesis-‐pairs are presented which will be investigated in this research to answer the purpose of this research. The hypotheses are operationalized in the methodology chapter 3.3.6.
Hypothesis 1.
H1: Growth oriented enterprises have implemented more e-‐CRM features than enterprises that aren’t growth oriented.
H0: Growth oriented enterprises have not implemented more e-‐CRM features than enterprises that aren’t growth oriented.
Hypothesis 2.
H1: Enterprises where the owner prioritises to maintain current standard of living have not implemented more e-‐CRM features than enterprises where the owner don´t prioritise to maintain current standard of living
H0: Enterprises where the owner prioritises to maintain current standard of living have implemented more e-‐CRM features than enterprises where the owner don´t prioritise to maintain current standard of living
6 Hypothesis 3.
H1: Enterprises with owners with an age under 40 have implemented more e-‐
CRM features than enterprises with owners with an age over 40.
H0: Enterprises with owners with an age under 40 have not implemented more e-‐CRM features than enterprises with owners with an age over 40.
Hypothesis 4.
H1: Enterprises with openness to changes have implemented more e-‐CRM features than enterprises that aren’t open to changes.
H0: Enterprises with openness to changes have not implemented more e-‐CRM features than enterprises that aren’t open to changes.
Hypothesis 5.
H1: Enterprises with high profitability have implemented more e-‐CRM features than those enterprises with low profitability.
H0: Enterprises with high profitability have not implemented more e-‐CRM features than those enterprises with low profitability.
Hypothesis 6.
H1: Enterprises with high growth rate have implemented more e-‐CRM features than enterprises with low growth rate.
H0: Enterprises with high growth have not implemented more e-‐CRM features than enterprises with low growth.
1.5 Delimitations
The authors of the research have chosen to only study the micro sized enterprises on the Swedish market of retailing, containing women-‐ men-‐ and children clothes and shoes. The reason for this is because a limit to one market might reduce the risk of biased result due to different market characteristics.
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2 Theory
The following chapter present theories relevant to the subject which will later on, together with the empirical investigation, be the ground for the analysis and result.
The chapter ends with a derivation of the hypothesis provided in the introduction chapter.
2.1 Definition of the retail industry
The following definition of the retail industry is from Nationalencyklopedin and defines the retail industry as the last link in the distribution chain and involves all activities used to sell individual goods from producer to final consumer.
Retailers’ products can be divided into two main groups containing durable goods and groceries. Groceries stands for products that are often bought by consumers while durable goods, which contain everything from clothes to home-‐
and leisure goods and cars, are bought more rare than groceries (www.ne.se).
2.2 Definition of Micro- and Small enterprises
The definition of micro-‐, small-‐ and medium sized companies are, according to the European Union definition, defined to their number of staff. Micro enterprises are defined as a company with less than 10 employees (1-‐9). Small enterprises are companies with less than 50 employees (10-‐49). A medium sized enterprise has a workforce up to 250 employees (50-‐249) (http://europa.eu).
2.3 CRM
In today’s markets, where competition is higher than ever and focus on retaining customer is of great importance, companies need to not only attract, but also build a valuable and long lasting relationship to their customers for their long-‐
term survival (Chang, 2007). Because of this, businesses have start realised the effect of Customer Relationship Management (CRM) which aim is to maximize the value for customers in the long run by focusing on understanding customer needs, maintain and build customer relationship (Kanji, 2002 found in Chang, 2007, Payne and Frow, 2005). Payne and Frow (2006), means that the term CRM and its system are relatively new but the principles behind it is not.
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Technology development has made relationship marketing a reality and customer relationship management a new area where firms can gain competitive advantages through systems (Rygielski, Wang, Yen, 2002). Because of todays developing business culture, where customers are in focus, companies are facing the needs of new solutions and strategies to keep up with these changes. The goal is therefore to conduct business with existing customers and build long-‐
lasting relationships with these, as the costs of acquiring new ones are higher.
The increased interaction with customer means that companies must store transactions records and responses in an online system that is available to staff members, an CRM-‐system (Rygielski, Wang, Yen, 2002). According to Sheth (2000), in the article of Payne and Frow (2006), CRM is today based on the principles of relationship marketing and is one of the key development areas in modern marketing when it comes to attracting, maintain and enhancing customer relationships. Also Light (2001) means that CRM has evolved from relationship marketing and the increased importance on improved customer retention. Although, relationship marketing concerns the relationship with multiple stakeholders, the principles of CRM are primarily on customers (Gummesson, 2002). This is a combination of processes regarding customers, sales, marketing effectiveness, responsiveness and market trends (Finnegan and Currie, 2010). Which can be concluded that CRM is a tool to perform and/or help the relationship marketing strategy a company is using.
The idea and the CRM software has existed a long time but not until 1990 the interest and utilization of these software grew. The explanations and definitions of what CRM is have changed during time (Boulding et al., 2005). These changing explanations and definitions have caused confusion since the literature hasn’t produced a unified definition of CRM, claimed by Zablah, Beunger and Johnston (2004) as found in Payne and Frow (2006). Some literature describes it as a business strategy (Parvatiyar and Sheth, 2002) and some as an technological tool (Payne and Frow, 2005). Though, it is clear that CRM puts the customer of the company in focus (Newell, 2000, Davenport, 2001, Xu et al. 2002, Bull, 2003 and Payne and Frow, 2005). The CRM tool is an software that collects, saves and distribute information about customers to enable the company to better meet
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their needs (Payne and Frow, 2005). This information gathered about the customer can be used to identify the right customer groups to focus on, meaning which customer group to increase or decrease effort on (Newell, 2000). The CRM software can be used to better perform in many areas of a company and where it interacts with the customer. The information gathered is used to better perform in marketing, management, sales, customer service and supply-‐chain functions (Parvatiyar and Sheth, 2002, Xu et al., 2002 and Bull, 2003). The overall aim of using CRM software is to achieve greater efficiencies and effectiveness in delivering customer value (Parvatiyar and Sheth, 2002).
CRM requires the firm to know and understand its market and customers. It is a system with essentially two-‐stage concept. The first stage aim is to build customer focus, which means that focus should be on a customer-‐oriented approach and not a product oriented. Focus should be on customers needs and not on products features. Companies in the second stage are moving beyond the basics and do not rest on their primary successes but push their development of customer orientation by integrating CRM across the entire customer experience chain (Rygielski, Wang, Yen, 2002).
2.3.1 CRM in SMEs
As found in Alshawi et al., (2009), Lang and Calantone (1997) states that small companies are mainly different from large companies when it comes to their financial abilities, which affect their information-‐seeking process, and because of this, their implementation of CRM is not as extended as in larger ones. Tereso and Bernardino (2011) support this as they state that implementation of a CRM system is not as common in small enterprises as in large ones. This can be because of limited financial abilities but also lack of knowledge about CRM.
Although, King and Burgess (2008) means that a successfully implementation of CRM will lead to competitiveness while Ramdani, Kawalek and Lorenzo (2009) states that CRM is necessary for small companies to survive on the market. Also Tereso and Bernardino (2011) means that implementation of CRM is of importance of small enterprises to improve their business value and competitive capabilities. Due to the fact that it is more costly to acquire new customers than
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maintaining existing ones, CRM can be of great importance to small enterprises with limited financial capabilities (Tereso and Bernardino, 2011).
2.4 E-CRM
Shortly and on a fundamental level e-‐CRM can be described as Internet present CRM and with the use of Internet technology (Harrigan et al., 2010). In e-‐CRM marketing activities, tools and techniques are delivered over the Internet, with the objective to locate, build and improve customer relationships on a long-‐term basis, as in CRM (Lee-‐Kelley et al., 2003). Since Internet has had a dramatic evolvement the last three decades companies have faced a new channel where they need to meet the customers, the Internet (Lee-‐Kelley et al., 2003 and Pan and Lee, 2003). The Internet have enabled marketing activities with improved efficiency in the development and richness of its content, which would perhaps not be available to SMEs if it weren’t developed (Gilmore et al., 2007). All interaction channels where a company can interact with customers need to represent the company in a consistent way, also all channels where customers can interact with the company (Pan and Lee, 2003). This is a challenge that can be handled with the aid of e-‐CRM if a company is present on the Internet, which integrate, captures and distribute data from a homepage and spreads it through the entire company (Pan and Lee, 2003). The growing market of e-‐commerce proves a major attendance of customers on the Internet (Lee-‐Kelley et al., 2003).
The number of people with Internet access on a personal computer more than doubled between the years of 2003 and 2010 in Sweden (www.scb.se). Since the Internet always is available the market Internet provides is always available for customers, which has resulted in better informed, more demanding customers and customers likely to be less loyal (Pan and Lee, 2003). With the use of an e-‐
CRM system a company is taking advantage of this presence of people on the Internet, using it with the same intention and objectives as CRM does. The objectives are to gather data about customer behaviour patterns to better understand their needs and through this enable profitable and long-‐term relationship. The gathering of data occurs through several Internet based tools, which register the customer actions on a web site (Feinberg et al., 2002, Kimiloglu and Zarali, 2008 and Harrigan et al., 2011).
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Feinberg, Kadam, Hokama and Kim (2002) found that Anton and Postmus (1999) identified a 25 e-‐CRM feature index used to measure how well e-‐CRM was used on a web site. To these 25 features, Feinberg et al. (2002) added 16 features found in several literatures. These 25 features are also used by Sureshkumar and Palanivelu (2011) in their research of e-‐CRM features on Airline E-‐ticketing websites. The 25 features measures how many tools, which are used to gather the data about customers and their behaviours and preferences are present on a company web site. This research will use the 25 first identified features of e-‐CRM found by Feinberg et al. (2002) and just some of the 16 later found features because the literature where these are found is not revealed by Feinberg et al.
(2002). This research has gone through some literature to find new features that might have been developed since the research was done by Feinberg et al., in 2002. When this literature review was conducted, some of the 16 newly added features by Feinberg et al. (2002) was found by the authors in other authors’
researches and therefor is used in this research. In total the authors have found 18 additional features to index e-‐CRM performance on a web site. Following a review of the 18 additional features are presented. The features are found when using keywords: web site attribute, web site feature, web site customer relationship, internet customer relationship etc. The features are evaluated whether if they fit with the objectives of e-‐CRM as presented above.
Additional e-‐CRM feature index review
In an article by Seock and Norton, (2007) it is found that product information, customer service and web site navigation has an inter-‐correlated relationship.
From this article it is found that features as price, up-‐to-‐date product information, size, colours, quality photos, sales assistance, return policy and order tracking are of importance to maintain customer relationships on a web site. The study is done on college students, but it is figured that it is worth to test whether they are representative for all kind of demographic groups.
In two articles it is found that privacy and security is of major importance for enhancing customer relationship and to achieve their trust. The privacy concerns
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the information the customer share when purchasing goods on an web site and that the company tells what privacy policy they have, whether they share the information to third parties or not (Yang et al., 2003, Rocha, 2012 and Feinberg et al., 2002). Concerning the security the site should use trustful payment methods and protect the credit card information (Yang et al., 2003 and Rocha, 2012). Rocha has also found several other web site features interesting for this research; delivery within suitable time, the site is always available for business, returning options are showed, and a phone number should be shown (Rocha, 2012). Concerning online selling, it has been found that apparel presented on models on web sites effects the purchase intentions positively and also a positive perception of the company and the web site (Kim and Lennon, 2009). The authors has when going through the web sites of the sample identified features that corresponds to the objects of e-‐CRM and therefor should be tested as an e-‐
CRM index. These four web site features has also been identified in Feinbergs et al., (2002) 16 additional features and has therefor been added to this research, these are find store(s), customer account information, member benefits and company profile. Bradshaw and Brash (2001) identifies many of the 25 features found by Feinberg et al., (2002) such as call back button, voice over IP and web chat and they also identifies telephone number presented on the web site as an important feature. It is also found that social medias has globalised and are used by many people in the world (Hutton and Fosdick, 2011). Therefor the authors have chosen to add Social media presence as an e-‐CRM feature in the research.
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The following table show the total number of features used in this research. For further description, see Appendix 1 and 2.
E-‐CRM features found in Feinberg, Kadam, Hokama and Kim (2002), in Feinberg and Kadam (2002) and in Sureshkumar and Palanivelu (2011)
1. E-‐mail 14. Product information online
2. Toll free number 15. Preview product
3. Fax 16. Product customization
4. Postal address 17. Online purchasing
5. Call back button 18. Purchase conditions 6. Voice over IP 19. Spare parts ordering
7. Chat online 20. Customize the site
8. Bulletin board 21. Complaining ability
9. Membership/Log in 22. Problem solving 10. Mailing list/newsletter 23. Local search engine
11. Site tour 24. FAQ
12. Site map 25. Links to complementary products
13. Introduction for first time user
18 additional features found in Seock and Norton (2007), Yang et al., (2003), Rocha (2012), Kim, Kim and Lennon (2009), Bradshaw and Brash (2001) and
Feinberg et. al., (2002).
26. Price 35. Delivery in suitable time
27. Up-‐to-‐date information 36. Always available for business
28. Size 37. Telephone number
29. Colors 38. Apparel on models
30. Quality photos 39. Find stores
31. Sales assistance 40. Customer account information
32. Order tracking 41. Company profile
33. Privacy policy 42. Social media presence 34. Purchase security 43. benefits for members
Figure 1: E-CRM features defined by Anton and Postmus (1999) as found in Feinberg et al., (2002) and 18 additional features identified in literature by Fagerström and Sjögren (2012).
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2.4.1 E-CRM in SMEs and micro sized enterprises
Several drivers of motivation for SMEs to adopt Internet as a marketing and communication tool is identified. The proactive reasons include the chance of eliminating competitive disadvantages of competitors in peripheral areas, the chance of lowering marketing costs and the promotion opportunity in a better and enriched surrounding. The reactive reasons include the fear of competitive disadvantage, increased local competition and shrinkage in domestic markets (Gilmore, et al., 2007). SMEs and micro enterprises operate in a different manner than larger companies since they are restricted due to their limited resources of funding, expertise and limited impact on their environment (Gilmore, et al. 2007 and Harrigan, et al., 2010). As a result of their limited resources SMEs and micro enterprises cannot perform at the same level as the theory describes, which is prescribed for larger enterprises (Harrigan, et al., 2010). Harrigan et al., (2010) claims that SMEs and micro enterprises perform CRM-‐like activities intuitively since their daily operations consists of close relationships with their customers.
Due to the lack of resources SMEs and micro enterprises do perform CRM and e-‐
CRM in a simplified way, but with the same objectives and ground rules as the theory (Harrigan, et al., 2010). The software used by SMEs and micro enterprises are not as complex as those used by larger companies, but they accomplish the same objectives. In SMEs and micro enterprises websites, email, and data mining is utilised, still their performance of e-‐CRM is of no lower importance than e-‐CRM activities performed by the larger companies (Harrigan, et al., 2010). Because of the generic characteristics of SMEs some barriers to adopt and maintain Internet technologies exists (Gilmore, et al., 2007). As said, the financial, human and expertise resources limit the ability for SMEs to adopt these technologies. These Internet based tools, IBT, also generate costs in both time and absolute funding when it comes to maintenance (Gilmore, et. al., 2007).
As found in Gilmore, et al., (2007), Herbig and Hale (1997) and Downie (2002) states that irregular updating and maintenance and lack of trained staff will provide little incentive for customers to visit repeatedly and so have serious financial implications for the company.
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E-‐CRM performs customer communication and information management in SMEs. Customer communication can be seen as the very heart of marketing in SMEs and micro enterprises, since their daily operation often is interacting with their customers, the interaction is constant, informal and open (Harrigan, et al., 2010). The use of e-‐CRM and IBTs, website and email tools, can facilitate the interaction between the company and the customers and it can be referred to as
“front office” e-‐CRM tools (Ang and Buttle, 2006). Customer communication through website and email enable information gathering about the customers, which the company needs to manage. The information is used for marketing decisions and segmenting the markets. Information management increases the organizational flexibility, efficiency, integration, communication, collaboration and, as stated by Du Plessis and Boon (2004), might foster a culture of innovation and creativity (Du Plessis and Boon, 2004). Information management tools are referred to as “back office” tools of e-‐CRM (Ang and Buttle, 2006).
Harrigan et al., (2010) claims that SMEs and micro enterprises should adopt and implement e-‐CRM as a strategic approach in order to reach full potential of benefits. Geiger and Martin (1999), found in Harrigan et al., (2010) presents three different strategies of a companys presence on the Internet when adopting e-‐CRM systems. They differ in the level of integration with the customer: an ornamental web presence, an informal web presence and a relational web presence. In an ornamental web presence the company only offer contact information, when having an informal web presence a company offer full contact information together with product and service information. The last strategy is a relational web presence which infers an interactive website, the interaction can be implemented through log-‐in, e-‐commerce facilities linked to the e-‐CRM “back office” (Harrigan, et al., 2010).
2.5 Growth intentions
Not all small firms are growth oriented, which means they are not focusing their business on financial growth (Smallbone et al., 1995). Often the strategic objectives of small firms are characterized by the personal lifestyle of the owner or managers’ lifestyle and they are more concerned with survival than of growth
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(Gray, 2002). But it is found by Smallbone et al., (1995) that firms with managers committed to growth are the best performing firms. What also distinguish the most growing firms is their active response to market opportunities when it comes to develop new products and services to existing customers (Smallbone et al., 1995). This is also found by Gray (2002) who claims that firms with openness to implementing changes are more growth oriented, and also that growth orientation is linked to actual growth. What is also found is that smaller firms in general are more resistant to changes. There are three levels of resistance to changes found by Maurer (1996) in Gray (2002); informational, gut reaction and cultural. Where the informational level represent resistance as a lack of information or understanding of what is required for a change, the level of gut reaction represent resistance of emotional, psychological and individual reactions and the final level of culture represent resistance because of historical failures or problems with past changes (Gray, 2002). The age of the owner or manager also has a role in how growth oriented the firm is, after the age of 40 growth orientation among owner-‐managers decreases (Gray, 2002).
2.6 Deriving at hypothesis
This chapter explains how the research derived at the presented hypotheses through reviewing literature. The literature motivating each hypothesis is presented before the hypothesis connected to the literature.
By Gray (2002) and Smallbone (1995) it is found that growth oriented companies are more actively responding to market opportunities when it comes to develop new products and services to existing customers. At the same time it is found that in general small firms are more resistant to implement changes (Gray, 2002). The benefits of e-‐CRM; process improvement, business cost reduction, improved customer perception and increased sales (Adebanjo, 2002), can result in growth of a company. From these facts hypothesis 1 derives:
17 Hypothesis 1.
H1: Growth oriented enterprises have implemented more e-‐CRM features than enterprises that aren’t growth oriented.
H0: Growth oriented enterprises have not implemented more e-‐CRM features than enterprises that aren’t growth oriented.
Gray (2002) claims that objectives of smaller firms often are characterized by the owners personal lifestyle and growth is not a prioritised objective. If a company is growth oriented they are more likely to actively respond to market opportunities and develop their products and services (Smallbone, 1995). Which can be concluded that if a companys objectives are characterized by the owners preferred lifestyle the owner and the company will not be prioritising implementing changes as growth oriented companies. From this discussion hypothesis 2 derives. Please notice that here H1 is the negated hypothesis and H0 is not.
Hypothesis 2.
H1:Enterprises where the owner prioritise to maintain current standard of living before growth orientation have not implemented more e-‐CRM features than growth oriented enterprises.
H0: Enterprises where the owner prioritise to maintain current standard of living before growth orientation have implemented more e-‐CRM features than growth oriented enterprises.
Gray (2002) claims that companies with owners under 40 years old are more growth oriented than companies with older owners. Growth oriented companies are more willing to implement changes and develop their products and services (Smallbone, 1995). Through this hypothesis 3 derives:
Hypothesis 3.
H1: Enterprises with owners with an age under 40 have implemented more e-‐
CRM features than enterprises with owners with an age over 40.
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H0: Enterprises with owners with an age under 40 have not implemented more e-‐CRM features than enterprises with owners with an age over 40.
Companies with openness to changes are more growth oriented as found by Gray (2002) and as found by Smallbone (1995) growth oriented companies are more actively responding to market opportunities. Through these discussions hypothesis 4 derives:
Hypothesis 4.
H1: Enterprises with openness to changes have implemented more e-‐CRM features than enterprises that aren’t open to changes.
H0: Enterprises with openness to changes have not implemented more e-‐CRM features than enterprises that aren’t open to changes.
Smallbone (1995), claims that companies with growth orientation is the best performing companies and Gray (2002) states that growth orientation is linked to the actual growth of a company. This concludes that it might be so that companies with higher profitability are more growth oriented and therefor also more open to implement changes and develop products and services as found by Smallbone (1995) and Gray (2002), which derives at hypothesis 5:
Hypothesis 5.
H1: Enterprises with high profitability have implemented more e-‐CRM features than those enterprises with low profitability.
H0: Enterprises with high profitability have not implemented more e-‐CRM features than those enterprises with low profitability.
As growth orientation is linked to actual growth (Gray, 2002) and companies which are growth oriented are more actively responding to market opportunities (Smallbone, 1995). This derives at hypothesis 6:
19 Hypothesis 6.
H1: Enterprises with high growth rate have implemented more e-‐CRM features than enterprises with low growth rate.
H0: Enterprises with high growth have not implemented more e-‐CRM features than enterprises with low growth.
