3

UNIVERSITITEKNOLOGI MARA ' ' '

ELECTRONIC CUSTOMER RELATIONSHIP (e-CRM):

A PULSE ON THE RETAILING COMMUNITY

Engku Badrul Nizam b. Engku Abdul Rahman

2003361436

Thesis submitted in fulfillment of the requirements for Bachelor of

Science (Hons) Information System Engineering

FACULTY OF INFORMATION TECHNOLOGY AND

QUANTITATIVE SCIENCES
UNIVERSITI TEKNOLOGI MARA
SHAH ALAM

November 2005
APPROVAL

ELECTRONIC CUSTOMER RELATIONSHIP (e-CRM):

A PULSE ON THE RETAILING COMMUNITY
By
Engku Badrul Nizam b. Engku Abdul Rahman

This thesis was prepared under the supervision of supervisor, Encik

Shamsudin Bin Md. Sarif It was submitted to the Faculty of Information
Technology and Quantitative Science and accepted as partial fulfillment of
the requirement for the degree of Bachelor of Science (Hons.) In Information
System Engineering

APPROVED BY:

EN SHAMSUDIN BIN MD SARffi.

SIGNATURE:
DATE:

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DECLARATION

I, Engku Badrul Nizam b. Engku Abdul Rahman (I/C number: 810715-11-

5501) hereby declare that this work has not previously been accepted in
substance for any degree, locally or oversea, and is not being concurrently
submitted for this degree or any degrees. This research paper also is the result
of my independent work and investigation, except for quotes and summary
that each of which their source are mentioned.

Engku Badrul Nizam b. Engku Abdul Rahman

2003361436
November, 2005

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ACKNOWLEDGEMENT

• ^

JiJ

First of all, I would like to express our gratitude to Almighty God as for His
Omnipotence and Merciful that led me the way to the completion of this thesis. After
a thorough hard works and patience that He gave us, this thesis could be done
smoothly with little limitations.

Upon completing this final year project 2005, I would like to take this
opportunity to express our deep gratitude to all the people who were involved in
assisting me completing this thesis. I would like to convey my appreciation Mr.
Shamsudin Md. Sarif who acts as my mentor and my supervisor for the paramount
patience and guidance throughout the whole process in completion of this research.
This research cannot be completed without his advice and encouragement.

Not to be forgotten is the lovely Mrs. Wan Nor Amalina Wan Hariri, our
lecturer for this subject, for her helpful information and comment. Also I would like
to take this opportunity to wish her a happy and a prosperous life. I also like to thank
you Prof Datin Dr. Noor Habibah Hj Arshad for being so kind in guiding us.

To, my beloved families who are always understand my busy schedule and
being really supportive to my thesis. Last but not least; to all the people who had
assisted me directly and indirectly in completing the thesis, thanks you for your help
and contributions.

IV
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ABSTRACT

e-CRM is an Electronic Customer Relations Management solution,

specifically designed and developed to suit all front and back office needs. e-CRM
will assist in maintaining and organizing all sales leads, customer base information,
list of products, quotation generating and tracking and competitor analysis. With e-
CRM, organizations can have instant access to up-to-date information and all the
latest on-goings of the organization, at anytime and anywhere.
This system is made to facilitate retaining existing customers, and also broadens
organization's prospects in the current challenging global market. It is fully equipped
with the latest technology to vastly enhance organizations' competitive advantage,
while maximizing overall operational efficiency and substantially reducing
unnecessary overhead costs. e-CRM enables organizations to foster a more fruitful
relationship with their customer, while simultaneously monitoring and boost
customers' satisfaction of the products and services. This research will investigate the
implementation of e-CRM by the main retailing sector in Malaysia, focusing on area
of Klang valley. The issues such as the way of implementation, risks, risks
management and customers feedback will be discusses by the researcher. The
recommendation about the implementation also included upon this research.

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TABLE CONTENTS

CONTENT PAGE
APPROVAL ii
DECLARATION iii
ACKNOWLEDGEMENT iv
ABSTRACT v
TABLE OF CONTENTS vi
LIST OF FIGURES ix
LIST OF TABLES x

CHAPTER ONE: INTRODUCTION

1.1 Research Background 1
1.2 Problem Description 3
1.3 Project Scope 5
1.4 Project Objective 5
1.5 Project Significant 6
1.6 Project Limitation 7
1.6.1 Poor feedback 7
1.6.2 Cooperation of companies 7
1.7 Overview of Each Chapter 8
1.8 Summary 9

CHAPTER TWO: LITERATURE REVIEW

2.1 Introduction 10
2.2 E-CRM Background 11
2.3 Application E-CRM in Retailing 13
2.4 Risks in Implementing E-CRM Project 16

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2.5 Managing the E-CRM Risk 17
2.6 The Future of E-CRM 19
2.7 Summary 19

CHAPTER THREE: METHODOLOGY

3.1 Introduction 20
3.2 Research Approach 21
3.2.1 Initial study 21
3.2.2 Detailed study 21
3.2.3 Research model 22
3.2.4 Data collection 23
3.2.5 Data analysis 24
3.2.6 Output 24
3.3 Summary 25

CHAPTER FOUR: RESULTS AND FINDINGS

4.1 Introduction 26
4.2 Demographic Resuh 27
4.3 The Approach and the Effect of E-CRM Implementation 28
4.4 Feedback from the Customers 35
4.5 The Resuk from the Customer Behaviour 37
4.6 The Risks in Implementing E-CRM 44
4.7 Managing the Risk 46
4.8 Summary 47

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CHAPTER FIVE: CONCLUSION AND RECOMMENDATION
5.1 Conclusion 48
5.2 Recommendations 49
5.3 Summary 51

REFERENCES 52
APPENDICES A: Sample of questionnaire
APPENDICES B: In-Progress Assessment

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LIST OF FIGURES
Figures 3.1: Process model for e-CRM research
Figures 4.1: Companies understanding about e-CRM
Figures 4.2: Percentage of companies which implement e-CRM
Figures 4.3: Reason for not implementing e-CRM project
Figures 4.4: Type of Channel Development project applied by the companies
Figures 4.5: Consequences effects from customer satisfaction selected by
companies
Figures 4.6: Frequencies of member's customers visit in a month
Figures 4.7: Frequencies of non-member's customers visit in a month
Figures 4.8: Percentage of member's customers spending their time to
shopping
Figures 4.9: Percentage of non-member's customers spending their time to
shopping
Figures 4.10: Percentage of customers who become members to the
companies
Figures 4.11: Percentage of non-member's customers
Figures.4.12: Percentage of member's customers spending their money to
shopping
Figures 4.13: Percentage of non-member's customers spending their money
to shopping
Figures 4.14: Approachfromthe companies which do not implement e-CRM
Figures 4.15: Rank of internal risks selected by companies
Figures 4.16: Rank of external risks selected by companies

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LIST OF TABLES

Table 4.1: Demographic result

Table 4.2: The ranking for priority objectives of implementing e-CRM
Table 4.3: The ranking for factors or interests of companiesfromthe
implementation of e-CRM
Table 4.4: The ranking for purposesfromfactors or interest from
implementing e-CRM
Table 4.5: Percentage of customers choose the reason to join the membership
Table 4.6: Percentage of customers who choose the privilege offered by
companies
Table 4.7: Percentage of members according to the type of receiving

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CHAPTER 1: INTRODUCTION

1.1 Research Background

Customer Relationship Management (CRM) is a broad term for managing a

business' interactions with customers. Effective CRM is about acquiring, analyzing
and sharing knowledge about and with your customers. Total CRM covers your
direct business contacts with customers, your channel partners' indirect contacts with
customers, and customer contact management in your supply chain. More
importantly, it allows a business to focus on the customer.
Electronic CRM or e-CRM is the customer relationship care component of e-
Business. Customer care linkages in the value chain for B2C and B2B electronic
commerce are critical elements for successful adoption of new products and for the
evolution of existing products. Technology is being deployed to an ever-broadening
set of businesses and the challenge for developers is to not only have the correct
customer care mechanisms in place, but in order to differentiate themselves from the
competition; it must be done either more cheaply or better than its competitors.
Customer-focused implies that there is a demand-pull of information that ultimately
focuses on the customer.
e-CRM is a solution, specifically designed and developed to suit all front and
back office needs. e-CRM will assist in maintaining and organizing all sales leads,
customer base information, list of products, quotation generating and tracking and
competitor analysis. With e-CRM, organizations can have instant access to up-to-
date information and all the latest on-goings of the organization, at anytime and
anywhere.
This system is made to facilitate retaining existing customers, and also
broadens organization's prospects in the current challenging global market. E-CRM
is fiilly equipped with the latest technology to vastly enhance organizations'
competitive advantage, while maximizing overall operational efficiency and
substantially reducing unnecessary overhead costs. e-CRM enables organizations to
foster a more fruitful relationship with their customer, while simultaneously
monitoring and boost customers' satisfaction of the products and services. It is also

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generally said that, "Putting customers at the heart of your business, and building
long-lasting relationship with them are the key ingredients in ensuring your business'
success."
e-CRM is an approach that integrates all of customer information and makes
it available for each customer contact, so we can provide the kind of consistent and
effective personalized service customers want. It need not be expensive for a small to
midsized company as it not primarily a single technology, but a refocusing of an
organizations collection and use of customer data using existing technologies.
Although companies selling unified e-CRM solutions may dispute this point.
e-CRM extends to all of the stakeholders that create value for the customer.
Value for the customer may be lower prices, higher quality products and services,
continuous stream of innovative new products and services, speedier responses,
convenience, and customization of products and services. Value is essential - it is
what customers are willing to pay in exchange for some offering.

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1.2 Problem Description

Many of the most influential retailing organizations are implementing

comprehensive CRM strategies, processes, applications, technologies and
organizational changes to transform themselves into market intelligent enterprises
that can respond to and adapt quickly to customer needs. The buzz seems to be
everywhere, but what is about e-CRM? Although it look similar to CRM but the
implementation might be different. How the organization implement e-CRM, what
are the approach taken. What are the critical challenges and risks these e-CRM
projects are facing when implementing it? And, how are organizations manage these
challenges and risks?
GIANT HYPERMARKET, MAKRO, TESCO, CARI^FOUR, JUSCO are
several of list of retailing company that looks like familiar to us in their way of
servicing customer. They sell almost the same pattern of goods and products
generally, low price, bundle, attract lots of people, and a lot of choices. But do we
have notice that the system their using is different especially in recognizing and
interact with then- costumer. Are they using e-CRM? Because the exact situation of
implementing it in Malaysia on retailing company or more focus in hypermarket that
become a target for this research, is unknown or still blur. If the answer is yes what
are the approach there are using in implementing e-CRM, do they really optimize the
usage of e-CRM. Is it meaningful and beneficial to them from what they are doing on
the systemfi-omthe implementation of e-CRM? How they implemented e-CRM in
the right way or just following the nowadays trend in business without taking any
concern about the advantages, in other words they just don't want to left behind from
other competitors in technology usage aspect. This problem need to be solve in order
to find and to have the best approach or solution that can become afi-ameworkto all
retailing company as a guideline that can utilize the business optimally without any
wasted.
It's not easy for any company in implementing e-CRM. Without any proper
plan and management, the profit that they hope can become a bad damage and
catastrophe to the company, a loss-making company. That is why we need to find out
what are the challenges and risks the company are facing off besides implementing e-

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CRM. To get notice on different group of customers, market position, customer
financial performance and customer understanding about e-CRM are several of the
challenge that they faces. It is just from external, not on the internal side yet. It has
information risk like stolen staff information from database and data damage or
technology risk like virus and unauthorized access to a web site. These are the most
common risk and challenge that generally assumed exists in e-Business world. We
need to have accurate information from the retailing company itself of what are the
real challenges and risk their facing now in implementing e-CRM so we can use it to
help in solving the first problem.
Others information that need to be concentrates are about the solution of the
problem above. The managing method of the challenges and risks are those that we
are looking for. How the company handle the situation or they do nothing about it,
just ignore the problem and continue a daily working routine.
What if the company does not implementing e-CRM? In this situation, we
need to discover the source or the problem facing by the company that not allowed
them to implement it. Why they cannot implement it. Is there any problem like big
risks to face, economic factors, do not have any expertise or any other thing that
block them to implement it? This we need to know.

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1.3 Project Scope

The scopes of this research are as follows:

• The research will focus on retailing organization in Klang Valley area which
they already have a big name and famous among customers.
• Survey will be conducted on retailing sector that has performed B2C and
B2B business transaction model.

1.4 Project Objectives

The objectives of this research project are:

• To identify the main retailing organizations or hypermarkets in Malaysia that
focusing in Klang Valley area, have they started using e-CRM, what are the
approaches taken to implementing e-CRM, what are the risks these projects
are facing and the managing step taken by the organizations in handling risks.
• To identify the response of the implementation to the customers.
• To propose the best approach or method of implementing e-CRM to the
retailing sector regarding the findings through this research so it can be
standardized by all company to perform more efficient and optimized.

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1.5 Project Significant

e-CRM is the technology that is categorize as a new technology in Malaysia

although it is akeady become an important method to organizations in developed
countries. Currently there are a lot of researches on going and discussion about e-
CRM all around organization in Malaysia.
With the existence of this research, it will help the organization in retailing
sector to manage and understanding their customer requirement and satisfaction by
improving the services and in the same time to get profit maximally. This research
will provide a guideline to retailing sector in order to manage risk efficiently when e-
CRM is implemented.

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1.6 Project Limitation

During the execution of this research, there are a limitations and

constraints that become a problem in achieving the data. These problems
must be faced and we try our best to reduce it.

1.6.1 Poor feedback

The questionnaire was distributed to the six selected companies but
none of them replied it back. The problem is we need to do the follow up like
to make a phone call for many times, send an e-mail and try to get an
interview, otherwise they just can reply the questionnaire and that all.
Unfortunately, it has come to understand that some of them did not
implement the usage of project management through phone calls and letters
replied. While some of the questionnaires are replied back empty or wrongly
answered. This is maybe because lack of understanding of the questions asks.

1.6.2 Cooperation of companies

Most companies in Malaysia do not gave the opportunity to students
to conduct their research. It has come to term that some of the companies'
information are considered confidential and cannot be made shared with the
public. This is maybe because the fear of letting the rivals obtaining the
information or as a marketing strategy for the company. Some of the
companies have made it policies not to entertain research groups. This is
maybe because the lack of staff and expertise or the understanding of what
the research is all about.

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1.7 Overview of Each Chapter

Chapter one
Chapter one contains information regarding the research background, the
problem statement, the project scope, the objective of the research, the
significant of the research, the project limitations and the overview of each
chapter in this research.

Chapter two
This chapter contains the literature reviews. Literature reviews is a
comprehensive survey of publications in a specific field of study or related to
a particular line of research, usually in the form of a list of references or an
in-depth review of key works.

Chapter three
Chapter three contains the research methodology. It is defined as the way in
which the data are collected for the research project. This chapter also
elaborates in great detail the research approach.

Chapter four
Chapter four will present the result andfindingsconcluded from the research.
Data presented will be elaborated in detail in this chapter.

Chapter five
Chapter five will provide a conclusion to the whole research. It will also
provide recommendations for future project and to the resuh of the research.

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1.8 Summary

Chapter one provides the whole guideline to the research. The

research will follow step by step instruction provided in this chapter in order
to meet the research demand. All objective and purpose stated in this chapter
will try to befiilfilledto produce the desired result for this thesis.

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CHAPTER 2: LITERATURE REVIEW

2.1 Introduction

Literature review is the effective evaluation of selected documents on

a research topic. In a context of a research paper, the literature review is a
critical synthesis of previous research. A literature review was conducted to
fiuther confirm the terms and the definition. Both local and international
literatures were reviewed. Through the literature review characteristics may
or may not be confirmed, as sometimes no supporting literature can be found.
Any related literature will be reviewed for the purpose of e-CRM research.
This will help gives us an idea on how to conduct our research.

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2.2 E-CRM Background

In today's fast changing global economic marketplace, organizations are

required to respond immediately in providing solutions to satisfy all customers;
needs and requirements. With the explosion and tremendous growth of technology,
organizations must constantly focus on the varying market trends as well as to stay
competitive. It is unquestionable that the effective use of this technology will not
only keep you in touch with customers' demands, but also will create new business
opportunities and diversify your customer base across the globe.
In a networked world of digital business, most of business firms from all
sizes are going online. This phenomenon is not matter of choice, but is becoming
necessity. The use of the internet, as a channel for commerce and information
presents an opportunity for businesses to use the internet as a tool for customer
relationship management. More over, there are justifiable prevalent agreements that
CRM has direct or indirect impact on customer satisfaction, loyalty, sales and even
profits. Primarily, a customer relationship management strategy envisages both
business and marketing strategy that incorporates technology, process, and all
business activities around customer.
e-CRM is programmed based in the Internet technology platform, which
combines the fundamental aspects of customer service and other more
comprehensive functions of sales and marketing into a single solution. With e-CRM,
it eliminates the redundancy of manual work and organizations can now concentrate
on expanding their business and market ventures.
Ro King (2002), executive vice president of Quaero Corporation, had
mentioned e-CRM can be defined as the systematic use of information to acquire and
retain customers through ongoing dialogue to create long lasting, mutually beneficial
relationships between customers and the enterprise. It also defined as a subset of
CRM. Technology and customer data, dialog and value are critical to both CRM and
e- CRM. The difference lies in the nature of e-CRM; it is real time, often via
electronic touchpoints where CRM can occur online or offline across any or all
customer touchpoints.

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 Other definition about e-^CRM is the process of acquiring, retaining and
growing profitable customers, to understand and anticipate their evolving individual
needs and maximize the life-time value of this relationship (Bourdon, 2001).
Research firm the Gartner Group defines it as consisting of a selling platform,
a communications infi-astructure, and a suite of applications. Infi-astructure can
include online chat, outgoing and incoming e-mail, and even multicurrency support.
And the applications can be geared toward self-service, customer service, or data
analytics. In other words, e-CRM is a profitability barometer, and the mercury is
customer sales. "Effective e-CRM means knowing my good customers, my bad ones,
and how can I improve service," says Yankee Group analyst Sheryl Kingstone. "It's
about customer loyalty, conversion, and retention."
Ro King (2002) also said that one of the areas where e-CRM has fallen down
in the past is in understanding, measuring and monitoring customer value. While the
sources of the data needed for value measurement may differ, the skills and
techniques used to measure customer value - an understanding of current and future
revenues, knowledge of costs associated with customer activities, predictions of
customer lifetime and attrition - are the same for online and offline customer value
monitoring.

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2.3 Application E-CRM in Retailing

There is clear logic to electronic customer relationship management (e-CRM)

being the central focus for business (Roberts-Witt, 2000). At its most basic level
there clearly is nothing more important than a customer. A business that does not
consider a customer important should try to do without them for 30 days. A satisfied
customer buys more, is more loyal, and more profitable over their lifetime (Anton,
1996).
Retailers should be especially interested in customer relationship
management (Triversity, 2001). The consumer has been (and will always be) the
central focus of their universe. The structure, organization, and business processes of
retail have always been (or at least they have always said) focused on the consumer.
Retailers should be way ahead of other businesses in understanding the nature and
scope of e-CRM.
e-CRM requires that a retailer (business) manages the customer interaction
whatever channel the consumer chooses to use; anytime, anywhere anyhow
(Feinberg et al, 2000). Agreement on a definition of e-CRM is not needed to address
more operational issues (for those interested, the different, sometimes opposite
definitions of e-CRM can be found elsewhere, e.g. Triversity, 2001; Montgomery
Research Inc., 2000). Despite the differences in nuance and definition there is
general agreement that e-CRM is good (although Feinberg and Trotter (2001) discuss
some possible negative effects of e-CRM).
During the past 20 years, the in-store and the telephone (1-800 call centers)
contacts have been the primary means of delivering quality CRM. It appears that in
the near future companies will rely on the ease and lower costs of E-CRM. Sterne
(1996) reports that Sun Microsystems reported saving $1.3 million annually through
Web based CRM. An unpublished study at the Center for Customer Driven Quality
highlights the potential savings: for one particular retailer the cost of an in-store
customer contact was estimated to be $10, the cost of a phone contact $5 and the cost
of a Web contact $0.01. (The cost differentials will differ for each retailer but it is
certain that whatever the actual numbers there is potential for considerable costs
savings in shifting consumers to Web applications and interactions.)

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 The shift of consumers to use of the Web for contact is not driven by the fact
that companies save money (consumers probably do not care if companies save
money unless it has a direct payoff for them). The shifl to Web access is a general
evolutionary migration of consumers to the Web for all aspects of retail and business
activity because of the Internet becoming more available and consumers gaining
more experience and comfort with Web business decisions. Consumers who do not
have Web access today will have access tomorrow. Those who have Web access but
have never purchased today will try tomorrow. Those who have tried yesterday will
do more on the Web tomorrow. It is logical to state that the growth and importance
of E-CRM is all but guaranteed (e.g. Reda, 2000).
Retailing should, by virtue of the nature of the business (direct customer
contact), be at the cutting edge of customer relationship management. To assess the
state of E-CRM in retailing we simply evaluate which of the 41 possible E-CRM
features are present on retail Web sites identified as the top retailers in their category
(an approach used successfully to begin to look at the first stages of Internet
integration by retailers by Morganosky (1997)). Stores Magazine (the voice of the
National Retail Federation, the leading and largest professional association of
retailers) publishes an annual list of the top general retailers, the top specialty
retailers, and the top Internet retailers. There is some reason to assume that e-retailers
would have more advanced E-CRM applications than traditional retailers. First, one
would assume that pure Internet retailers think "e" morefi-equentlyand better than
traditional bricks and mortar stores. Second, pure e-retailers have more experience in
the "e" space and probably have greater expertise. Indeed, online shoppers have been
found to be more satisfied shoppingfi-ompure e-retailers (Infoworid, 2001).
In order to implement eCRM successfully, the method taken must be clearly
identify. According to Ro King (2002), there are two basic methods for
implementing eCRM: comprehensive implementation and targeted implementation.
For companies that have a lot of money, comprehensive implementations will work
primarily for them. It will include the following steps; an evaluation of any business
process which relates to the customer, an evaluation of the firm's customer data
structure, an assessment of the firm's technology infrastructure and the development
of a comprehensive plan with projects prioritized.

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