Voralberg University of Applied Sciences, Austria 6th International Conference, For Consumer Behaviour and Retailing Research. THE CIRCLE, 16th – 18th April 2009 Dinesh Vallabh Dimitri Tassiopoulos Address correspondence to: Dinesh Vallabh – Senior Lecturer School of Tourism and Hospitality (SCOTH) Walter Sisulu University Eastern Cape Province South Africa
[email protected] Tel: +2743 702 9343 / 9285 Fax: +2743 702 9284 Dimitri Tassiopoulos – Associate Director School of Tourism and Hospitality (SCOTH) Walter Sisulu University Eastern Cape Province South Africa
[email protected] Tel: +2743 702 9201 / 9285 Fax: +2743 702 9284
Title of Paper Customer Relationship Management (CRM) in small- to medium-sized tourism enterprises (SMTEs) of the Eastern Cape Province, South Africa Abstract The democratic election of South Africa in 1994 brought about political liberation for the majority of South Africans on a path of renewal and transformation with the tourism industry widely regarded as a strong economic driver. Although the tourism industry has some large organizations, the sector is numerically dominated by SMTEs (Tassiopoulos, 2008). The Eastern Cape Province is no exception where SMTEs play a crucial role in developing the economy and creating new opportunities. The 2007 Skills Audit and Tourism Human Resources Strategy for South Africa revealed that service excellence was one of the most crucial ingredients in developing sustainable tourism growth. The audit further highlighted the need to urgently develop a customer service programme and transform South Africa into a globally competitive service economy and destination choice. The Travel and Tourism Competitiveness Report 2008, ranked South Africa 60 out of 130 countries overall, and revealed that the country ranked 118 out of 130 countries in terms of Human Resource development and was a cause for concern in providing service excellence. Competition among SMTEs, according to Tassiopoulos (2008), has never been greater than it is today. It is emphasised that SMTEs must find a competitive edge by focusing on quality. Customers are vital to all SMTEs and therefore meeting customer needs and providing service excellence are important keys to business survival and prosperity. CRM can help businesses enhance their customer relationships by attracting customers that are more profitable and establishing stronger and more durable customer relationships. Ozgener and Iraz (2006), highlight that CRM transform organizations into customercentric enterprises that maximize the value of every customer and therefore underpin CRM as currently one of the hottest topics in the fields of business strategy, marketing management and information technology. The literature on CRM clearly points to how CRM activities will make SMTEs more sustainable by sales staff developing a closer customer relationship, thereby increasing customer loyalty because of more efficient service. While there are many factors that cause SMTEs to fail, this study is aimed essentially towards improving the survival role of SMTEs in the Eastern Cape Province, by focussing on the appropriate CRM for SMTEs. This paper reviews the existing CRM literature and identifies and analyses the characteristics of the SMTE service excellence business models. This paper aims to examine the relationship between SMTE service excellence and CRM in the Eastern Cape, as well as to identify the characteristics of CRM for sustainability among SMTEs. The importance of the issues for a developing tourism economy in the Eastern Cape is vital. Further, it reviews the opportunities and challenges SMTEs are facing when managing CRM. The outcome of the above-mentioned research would eventually lead to the creation and validation of a CRM model for SMTEs. Key words SMTEs, CRM, service excellence, competition, South Africa.
Introduction The 1994 democratic election of South Africa brought about political liberation for the majority South Africans on a path of renewal and transformation. The South African tourism sector has shown a worldwide annual growth of 5%-6% (BCM: Annual Report, 2007/2008) and is widely regarded as a strong economic driver in South Africa. SMTEs play a crucial role in developing the tourism industry, and creating new work opportunities. National policy frameworks have been introduced to support SMTEs because they are recognized for their potential to improve the economy. Tassiopoulos (2008) defines tourism entrepreneurship as activities that create and operate legal tourism businesses (that operate on a profitable basis and seek to satisfy the need of tourists). Numerous governments and policy-makers according Tassiopoulos (2008) now rely on tourism for economic regeneration and strategic local development. SMTEs key role is recognized by governments and international organisations such as the WTO and European Commission. In a recent study, conducted by DEAT (2007), it was indicated that established SMTEs overwhelmingly dominate the local tourism economy. The study further revealed that although many established SMTEs have been in operation pre-1994; there has been a surge of new SMTEs to take advantage of opportunities linked to the tourism boom of post- 1994 period. The hospitality sector (food, beverage and accommodation) represents the largest sub-sector of the tourism industry with 67% of the employers and 77% of the employees. SMTEs have a major role to play in the South African economy in terms of employment creation, income generation and output growth. It is estimated that more than 12 million people in South Africa are actively involved in the SMME sector and account for approximately 60% of all employment in the economy and 40% of output (BCM : Annual Report, 2007/2008). According to Tassiopoulos (2008), the largest proportion of SMTEs in South Africa, consists predominantly of white-owned SMTEs that operate a host of different establishments from travel and touring operations, restaurants, small hotels, self- catering and resorts, game farms, bed and breakfasts or backpacking hostels. There is an emerging black-owned group of enterprises, which constitutes a mix of formally registered micro-enterprises as well as a mass of informal tourism enterprises. Virtually all tourism offerings are intangible, and therefore it becomes important how it is delivered to the consumer, i.e. the level of customer service. Relationships with customers cannot be sustained if there are any problems with the quality of the offering. George (2008), states that in tourism marketing the delivery of service is the primary measure of quality. The quality of the offering must live up to the claims made by marketers. It is important to make customers feel special and make them feel that the organisation has chosen to provide them with attention. Many developing countries, including South Africa experience a general culture of poor service in the tourism industry (Keyser, 2006). Furthermore, there is little interest in delivering service or going that extra mile to satisfy customers. The problem is that service is often exacerbated by high prices that do not match quality of service offered. Many owners of SMTEs are either ignorant of customer expectations or lack exposure to market requirements. Powers and Barrows (2006) assert that quality service is service, that “consistently meets and exceeds customer expectations.” Exceeding customer expectations results in a perception of high- quality service. Failure to meet expectations results in the customer’s perception of quality being relatively low. Further, since service is perceptionbased, the true measurement rests with the individual customer. Haahti (2003) outlines the strategic core processes that determine much of the core competence and its competitive edge in SMTEs as:
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Understanding the needs, wishes and choice behaviours of guests and potential customers in order to create profitable business relations. This includes targeting, segmentation and positioning. It also means the beginning of the cocreative process of understanding your customer, where the ideas of experience manuscript are collected, chosen and written to meet the choice objectives of the customer and the profitability objectives of the company. Meeting the guest is the critical encounter between the guest and the host or representative of the host. For customers it may be the main source of stress, ambivalence and risk before getting to know a new place. Staging the experience, providing the services, and selling the products that augment the experience are dependent on the structures and processes that are used to create and support the experience staging. It offers innumerable possibilities for delighting and trust building in the relationship. The management structure, including information technology and management processes, create the context and conditions for a successful experience. The first three core processes are dependent on the quality of the management processes in forming of the experience value chain. The management of the quality of the experience needs to be submerged in the design and staging for evaluation.
Customer service is anything that an enterprise does to enhance the customer experience. This means meeting their needs and exceeding their expectations. It is about being polite, friendly and caring to customers. Delivering quality customer service is an important strategy for any SMTE in South Africa to survive and grow. South Africa has good potential for development of the tourism sector and it is within this context and because of its coast and the many natural attractions, the Eastern Cape Province is seen to have good potential. Whilst the tourism sector is growing, there is a clear responsibility of ensuring that previously disadvantaged individuals are also benefiting from the sector. The need to develop community based tourism products and supporting emerging tourism SMTEs to facilitate transformation has become an urgent matter. Sustainable growth of SMTEs has become a challenge; hence the question of how to manage growth of SMTEs is an important one. The strategies an entrepreneur implements, or does not implement, will determine whether a business will survive, and also to what extend it can expand. In South Africa, tourism has become fiercely competitive business, and in the light of transformation, numerous windows of opportunity have opened for entrepreneurs in the tourism industry. There are opportunities in the development of manufactured attractions, for example monuments, theme parks, waterfront developments, zoos, parks, game reserves, arts and crafts galleries and cultural tourism. Support services such as catering, tourist guides, marketing and training could also offer good opportunities for entrepreneurs. The fields of entertainment, restaurants, shebeens (township liquor outlet and pub), coffee shops, tea gardens, acting, traditional dancing and music offer just a few of the many opportunities (Saayman, 2008). The tourism industry is becoming more professional with increasing emphasis on quality management and greater responsiveness to discerning customer expectations. This raises pertinent issues for the sustainability for SMTEs. Limited research on SMTE profiles has been indicated (Getz, 2008). It has been found that SMTEs are characterised by family-run
businesses, managers have few formal qualifications, limited previous experience in tourism and further that SMTEs have very low levels of capital investment that possibly impacts negatively on quality. Seasonality of demand is a major factor affecting the viability of small tourism and hospitality enterprises, especially in rural and remote areas. Seasonality of demand is normal, often resulting in cash-flow problems, low profitability, and the necessity of relying on family members as staff (Getz, 2008).The marketing challenge for products affected by seasonality is to produce revenue during off-peak times. Tourism suppliers try to even out the use of products or to create demand for their products during off seasons (Keyser, 2006). The use of CRM in SMTE would assist with issues regarding seasonality. Recently, South Africa’s Department of Environmental Affairs and Tourism (DEAT), highlighted service excellence as a strategy, and emphasized that customer service is one of the critical skills because there has been a lack of underlying service ethos that prevails across the board in the country. These statements stem from a competitiveness rating, whereby South Africa was rated number 62 out of 124 countries that were assessed. Van Schalkwyk, Minister of Environmental Affairs & Tourism (2008) revealed that an audit undertaken to examine skills levels, indicated that service excellence was one of the most crucial ingredients in sustainable tourism growth. The audit also highlighted the need to urgently develop a customer service programme and transform South Africa into a globally competitive service economy and destination choice. The Eastern Cape Province is no exception where SMTEs play a crucial role in developing the economy and creating new opportunities. Poor service levels standards were identified as one of the barriers that need to be addressed to facilitate tourism-related product development in the Eastern Cape. Nelson Mandela Bay Tourism’s research indicates that service levels in restaurants were below par. Further, there was a skills shortage among tourism organizations, municipalities and communities in management and implementation (Porter, 2008). Tourism is a human capital-intensive industry, where skilled service orientated people are the backbone of the sector. Soft skills of business etiquette, customer care and service culture are not manifesting according to the Tourism Business Council of South Africa. Indeed, this highlights the importance of all partners in the tourism service value chain to commit to service excellence. The business environment needs to be nurtured where service excellence is firmly entrenched in the culture, policies, processes and mindset of country leaders and service providers. As a business philosophy, CRM is the most significant development in the evolution of marketing since the 1960’s. It enables the marketing, sales and service functions to be truly integrated, company priorities to be clarified and resources to be more planned and cost-effectively deployed. Customer-driven business management should be embraced by all functions at all levels (Burnett, 2001). Customers are a vital asset of any organization. Increased global competition in recent years has forced many organizations to become more customer orientated. Decreasing customer loyalty has led to the emergence of concepts that focus on nurturing of relationships to customers. Major changes have been noted in the way companies organize themselves, as businesses switch from product based to customer –based structures. A key driver of this change is the advent of CRM that is underpinned by information and communication technologies (Ozegener & Iraz, 2006).
Shajahan (2004) define CRM as the process of managing the detailed information about individual customers and carefully managing all the customer “touch points” with the aim of maximising the customer loyalty. CRM is an active, participatory and interactive relationship between business and customer. The objective is to achieve a comprehensive view of customers, and be able to consistently anticipate and react to their needs with targeted and effective activities at every customer touch point. To survive in the global market, focusing on the customer is becoming a key factor for SMTEs. It is known that it takes up to five times more money to acquire a new customer than to get an existing customer to make a new purchase. Hence, customer retention is essential to SMTEs because of their limited resources (Ozgener & Iraz, 2006). CRM is the strategic application of people, processes and technology to improve and sustain profitable relationships with customers and partners. The Eastern Cape of South Africa faces serious challenges in endeavouring to remain sustainable as there is a high failure rate of SMTEs in the province. Research objectives of this paper Based on existing generic CRM theory and models, the aim of the study is to develop a SMTE-specific CRM body of theory which contributes toward sustainable business practices in the South African tourism industry. It is against this background that this literature review will be conducted with the objectives outlined hereunder: -
To examine the existing literature on CRM in SMTEs in general. To review the opportunities and challenges that organizations, particularly, SMTEs that are dealing with CRM. To contribute to the body of knowledge concerning the appropriate form of CRM for SMTEs.
Literature review Tourism is a highly competitive industry, with many SMTEs in South Africa offering similar types of offering. One of the ways that an SMTE can gain an edge over the competition is by providing their customers with excellent service. Therefore, as an SMTE, it is imperative for one to identify what customers’ needs are and meeting of those needs. The characteristics and challenges of SMTEs have received considerable attention from governments and academic researchers since the late nineties. The task of satisfying customers in services is much more difficult than it is for the manufacturer of a product (George, 2008). Customer service management As SMTEs increasingly understand the value of forming profitable long-term relationships with their customers, the appropriate forms of CRM is well placed to aid with the growth of SMTEs (Kumar and Reinartz, 2006). The traditional CRM solutions have focused on building competitive advantage for enterprises in terms of products, services, pricing and distribution, but the new and evolving view focuses on building sustainable competitive advantage for SMTEs. Sustainable competitive advantage can be defined as the ability to deliver superior value to the market for a protracted period of time (Du Plessis, Jooste & Strydom, 2001). Superior value according to these authors refers to the fact that consumers of a product or service must be convinced that they are getting something of value for their money. The real heart
of an organization, like the heart of any SMTE, will be your customers, and therefore good treatment of customers is vital to any SMTE. The focus of all tourism organizations, whether small or large, is to provide customers with what they want. Providing excellent customer service will help achieve a high level of customer satisfaction and will encourage customers to return, and to recommend the SMTE to other people (George, 2008). A SMTEs ability to remain in business is a function of its competitiveness and its ability to win customers from competition. Cook (1992) states that as competition becomes more intense, many SMTEs have realised that they cannot compete on price alone. It is in these marketplaces where SMTEs have developed a strategy of providing superior customer care to differentiate their products and services. It is further emphasized that small businesses should be proactive and take the lead (Van Aardt,Van Aardt, Bezuidenhout & Mumba, 2008). The evolution of computer and communications technology, particularly the Internet and database software, has shifted the balance of power from producers to consumers. Customers now launch transactions. Customers can find valid information about SMTE products, including price, availability, features, and delivery times on the Web. Customer management processes must help the company acquire, sustain, and grow long-term, profitable relationships with targeted customers (Kaplan, 2004). Kaplan (2004) highlights that customer management consists of four generic processes: -
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Select customers: Identify customer segments attractive to the enterprise, craft the value proposition to appeal to these segments, and create a brand image that attracts customers in these segments to the company’s products and services. Acquire customers: Communicate the message to the market, secure prospects, and convert prospects to customers. Retain customers: Ensure quality, correct problems, and transform customers into highly satisfied “raving fans.” Grow relationships with customers: Get to know customers, build relationships with them, and increase the company’s share of targeted customers’ purchasing activity.
Customer management strategies should include execution along all four aforementioned processes. Kaplan (2004) asserts that many organizations pay too little attention to retaining customers. They treat sales as transactional events, avoid contact with their customers after the sale, and fail to measure whether they retain them for future business. A key strategy in the marketing approach (Cooper & Hall, 2008) is to build relationships across the marketing networks of an organization. Cooper & Hall (2008) define relationship marketing as creating, maintaining and enhancing strong relationships with customers. Relationship marketing differs from transactional marketing because it takes a longer-term view, emphasizes the relationship and not the transaction and focuses on trust, partnership and research into the characteristics of the customers. Cooper & Hall (2008) highlight that the keys to success is the judicious identification of customer groups and that tourism organisations must recognize that regular customers are not always profitable, instead relationship building will engender true loyalty. In turn this will deliver organizational growth and profitability for the organization because customer acquisition costs are reduced. Relationship marketing can be viewed as a fundamental business philosophy leading to genuine customer involvement.
Tie (2003) underscores that as far as SMTEs are concerned, a clear CRM vision should explain why SMTEs needs CRM. CRM enables and supports SMTEs strategies, such as overall cost leadership, differentiation, and focus. This vision will guide a SMTE through the process of CRM planning. The more uniform the understanding is of the CRM vision, throughout the entire enterprise, the smoother the CRM planning process. Morphitou (2008) asserts that CRM initiatives require vision and each and every employee must understand the purpose and changes that CRM will bring. Re-engineering a customercentric business model requires cultural change and the participation of all employees within the organization (Chen & Popovich, 2003). Thus, employees must also come to terms with changing business processes and culture in order to serve customers better. Successful implementation of CRM means that some jobs will significantly change. Management must show its commitment to an ongoing company-wide education and training programme. Winer (2001) asserts that CRM is the new “mantra” of marketing. The traditional focus of marketing was the acquisition of new customers; however, this has shifted to customer retention (Light, 2003). Relationship marketing emphasizes building relationships that lead to customer retention and long-term customer loyalty, in juxtaposition to traditional transactional marketing, in which making a one-time, immediate sale to the customer is the primary goal (Fjermestad and Romano Jr., 2003). Further, it has been shown that a small increase in retention (5 percent) can yield a 95 percent increase on the net present value delivered by customers. Relationship marketing is in contrast to 4Ps marketing: product, price, place and promotion that emphasize attracting businesses, but less so retaining businesses (Lindgreen, 2004). 4Ps marketing is also known as traditional marketing or transaction marketing. The integration of Internet technology and rapid improvement in information technology facilitated the growth of CRM; however, CRM is clearly not only about technology, whereby enterprises look for a software quick fix without examining a clear CRM strategy. Just as building a house first requires an architectural plan, successfully implementing CRM must be preceded by a sound CRM strategy. Tie (2003) assert that many CRM projects failed because many SMTEs are anxious to implement CRM technologies, however, lack a thorough assessment to determine whether the SMTE is ready for CRM. Therefore, in order to avoid such destructive mistakes, SMTEs should thoroughly evaluate its CRM readiness before development. Kumar and Reinartz (2006) advocate a customer-centric business philosophy, whereby the customer is treated as an asset and the focus is shifted away from the product to customer as the source of wealth generation. Hence, it is important to actively deepen the knowledge about customers and use this knowledge to shape the interactions between an enterprise and its customers in order to maximise the lifetime value of customers for an enterprise. Benefits of CRM Ozgener and Iraz (2002), highlight the SMTE benefits of CRM include the following: -
Gathering and integrating information on customers. Nurturing and maintaining company’s customer base. Increasing customer satisfaction. Declining customer acquisition costs. Ensuring sustainable competitive advantage.
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Maximising profitability due to increased sales. Increasing customer loyalty as a result of more personal and efficient service. Enabling micro-segmentation of markets according to customers’ needs and wants. Collaborating with customers for joint value-creation. Acquiring well-accepted outcomes of data-mining activities. Supporting effective sales effort through better management of the sales process.
Van Aardt et al (2008), maintain that CRM can be beneficial in that it can be a competitive advantage. Further, it improves customer care and provides memorable experiences for the client. Gerson (1996), states that high quality customer service is as a much marketing tool for your business as it a management approach or philosophy. Service quality improves your marketing because it motivates customers to tell others about you. The least expensive way to acquire new customers is through word-of-mouth referrals. Good service also improves and makes management easier, because everybody is committed to satisfying the customer. Morphitou (2008) maintains that to survive in today’s dynamic market places; SMTEs clearly need to establish strategies that can survive the turbulent changes in the market environment. The need for CRM is underlined by the following three observations: -
Some customers are more profitable than others, while others can cost a SMTE money Loyal customers are more profitable- new customers cost 5 to 10 times more to acquire Customers expect relationships- SMTEs rarely provide them
The need for CRM in small business The success of a business derives from satisfying the needs of all stakeholders, namely, customers, shareholders, employees, suppliers and the community at large. Of these, the most pressing demands come from customers. If customers are regarded as an important asset for a company, CRM is undoubtedly a necessary tool to attract and retain this valuable asset (Zeng, Wen and Yen, 2003). The future of CRM is largely decided by three factors: -
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Market. Since markets are becoming saturated and communication channels delivering marketing messages are more saturated, customers are demanding to have a different relationship with suppliers from the traditional sales model. This makes CRM more important than ever due to the change of marketing model from traditional product-centered to current customer-centered. Technology. The future successful SMTEs will be those which focus their main efforts on the research of what customers want, how to better meet the customers’ needs, and how to keep customer loyalty and retention. CRM is a business system for acquiring and retaining customers. A good CRM system of a SMTE should be integrated with the appropriate technology to provide a differentiated service for retaining the customers. Economy. The cost of losing profitable customers to competition is very high and is unlikely that once lost the customer will return. This poses a challenge for CRM and thus makes CRM especially important for customer retention and loyalty. A CRM system is also able to provide information regarding who your customers are and what they buy. CRM, from this perspective, is a typically
value-added activity and it largely helps the SMTE to increase the revenue and reduce the sales cost (Zeng et al, 2003). It is impossible to ignore the striking similarities between CRM and relationship marketing. Relationship marketing is based on the idea that the happier a customer is with a relationship, then the greater the likelihood they will stay with an organization. There is also strong evidence that customer retention and profitability are correlated. Relationship marketing is about attracting, maintaining and enhancing customer relationships (Light, 2003). CRM is a highly fragmented and means different things to different people. One view of CRM is the utilization of customer related information or knowledge to deliver relevant products or services to customers (Bull, 2003).While such definitions are widespread, they tend to offer a narrow insight into the goals or basic characteristics of CRM. The question of how to manage growth is an important one for the SMTE owner, as growth of an SMTE is inextricably linked to the phase of CRM development. Figure 1 illustrates the SMTE growth phases linked to CRM development stages. Hence, it is important to look at the key stages of growth of an SMTE and thereby understand the appropriate stage of CRM to be implemented. As an emerging discipline, CRM is in great need of theoretical assistance. Guiding theories and models are in short supply in the field, probably due to the fact that it is a new area for research. The stages can be determined by the level of IT employed and the sophistication/ integration of the information system used in the enterprise (Stefanou & Sarmaniotis, 2003). The developmental stages of CRM are as follows:
The first CRM development stage is the preliminary, non-IT assisted stage. Survival of the enterprise is of paramount importance in this stage. Enterprises belonging to this stage have a very limited or no use of IT as far as managing customer relationships are concerned. Customer surveys and manual recording systems are generally used. The second CRM development stage can be linked to the profitability phase of the SMTE, whereby profitability of the enterprise is of importance. IT-assisted CRM, predominately a manual process that uses IT to enhance the SMTE-customer relationship and analyse customer-related data is used. Enterprises belonging to this stage are expected to have some Internet presence and manage effectively and efficiently customer satisfaction and complaint behaviour. The third CRM development stage can be linked to the take-off leading to the growth of an SMTE. Generally, IT-automated CRM, which emphasizes customer interaction by using a number of technologies, such as the Internet and telephone/computer integration is used. Enterprises belonging to this stage have active Websites, engage in e-commerce aimed at business processes optimisation and sales force automation. Processing of customer requests, orders, and management of customer accounts are expected to be timely and accurate and generally at a high level of efficiency. The fourth CRM development stage can be linked to the maturity phase. The enterprise needs to modify its operations to maintain profitability. Integrated CRM (i-CRM) is used here, leading to customer personalisation and high level of service and customer satisfaction. At this stage, enterprises employ sophisticated CRM information systems providing highly integrated back-office, front office and
Internet functions. Rejuvenation of the SMTE is essential in this phase. Continued CRM operations would prevent possible decline of the enterprise.
CRM DEVELOPMENTAL STAGES
Figure 1: an integrated conceptual model of CRM for SMTEs
Non ITAssisted CRM - manual recording systems - customer surveys
SMTE Survival
IT Assisted - fax mail -spreadsheet databases -internet presence
En SMTE profitability
IT automated CRM -statistical packages -e-commerce -operational CRM
SMTE growth
CRM is operational to continue growth of business
En SMTE maturity
Rejuvenation
En Capped growth
GROWTH PHASES OF SMTEs
Growth orientated
En
Source: adapted from Saayman (2008), and Stefanou and Sarmaniotis (2003) The proposed CRM model, as depicted in figure 1, specifies the basic parameters of the various CRM development stages in the context of various growth stages of SMTEs. The number of employees, is a popular criterion of SMTEs. In a study conducted to distinguish between start-up, new and established SMTEs in South Africa, the results of the study, according to Getz (2009) indicated that SMTEs that are mostly characterised as having been in operation for more than 42 months are considered to be established SMTEs. Further, SMTEs with less than 15 employees accounted for about 79 percent of all tourism business which is a feature that characterises the tourism industry in many countries. Recent research findings according to Tassiopoulos (2009) indicate that the employment share for the “trade and tourism” sector for micro SMTEs was 97 percent. Tassiopoulos (2009) highlights three key influences that play a role in the growth rate of SMTEs: the background and access to resources of the entrepreneurs, the business itself, and the strategic decisions taken by the business once it is in operation. As the tourism market mature, SMTEs will be competing in an increasingly tough and discerning market. The rapid growth of the international tourism industry has increased the professionalism required in the market to survive. Hence, planning for SMTE growth is essential in order to maintain quality and service to customers.
CRM development approaches according to Tie (2003), comprise two alternatives: one is in-house, also called as home grown development, meaning a SMTE build its own CRM system through acquiring and installing CRM vendor’s software products in place. It usually requires a certain amount of customisation and integration with legacy systems. The other alternative, is outsourcing CRM development to a third party that usually is an ASP (Application service provider). Problems and challenges of CRM Zemke & Woods (1998), assert that the purpose of the SMTE is to create a mutually beneficial relationship between itself and those that it serves. While the owner has to be concerned with profit, a strong focus on profits will not guide one as to what is needed to generate profit, however, figuring out how to best serve customers is required. The fact is that being more concerned with profit than customer needs is at the heart of poor management and the cause of many problems for organisations. The rise of consumerism and laws that protect consumers demonstrates, Peter Drucker (1993), as in Zemke & Woods (1998) has observed, “that not much marketing (effectively serving customers) has been practiced.” Drucker also reminds us that profit is not a goal but “a measurement of how well the business discharges its functions in serving market and customer”. This clearly demonstrates that profit and customer service are intimately related. The organisation’s profit is a measure of the value and quality of the service it delivers to customers. The promise of customer relationship management is captivating, but there is sufficient evidence to support the notion that in practice it can be perilous. CRM allows companies to gather customer data swiftly, identify the most valuable customers over time, and increase customer loyalty by providing customized products and services. It also reduces the costs of serving these customers and makes it easier to acquire similar customers and makes it easier to acquire similar customers down the road. A popular question that arises in CRM literature is: Why do CRM initiatives fail so often? Research conducted by Rigby et al, (2002) suggest that the one reason CRM backfires is that most executives simply do not understand what they are implementing, let alone how much it costs or how long it will take. Further, their research indicates that many executives stumble into one or more pitfalls while trying to implement CRM. Rigby et al, (2002), highlight four pitfalls to be avoided: 1. Implementing CRM before creating a customer strategy. Effective CRM is based on good old-fashioned segmentation analysis. It is designed to achieve specific marketing goals. To implement CRM without conducting segmentation analyses and determining marketing goals would be like trying to build a house without an architectural plan. 2. Rolling out CRM before changing the organization match. A CRM rollout will succeed only after the organization and its processes- job descriptions, performance measures, compensation systems, training programs etc have been restructured in order to better meet customers’ needs. 3. Assuming that more CRM technology is better. Customer relationships can be managed in many ways, eg, motivating employees to be more aware of customer needs. Merely relying on a technological solution, or assuming that a high-tech solution is better than a low-tech one, is a costly pitfall.
4. Stalking, not wooing customers. Relationships are two-way streets. Failure to build relationships with customers who value them, one is bound to lose these customers to a competitor. The philosophical bases of CRM are relationship marketing, customer profitability, lifetime value, retention and satisfaction created through business process management. Anton (1996), Couldwell (1998) and Goldberg (2000), as in (Chen & Popovich, 2003), characterizes CRM as an integrated approach to managing customer relationships with reengineering of customer value through better service recovery and competitive positioning of the offer and further depicts CRM as a combination of business process and technology that seeks to understand an SMTE customer from the perspective of who they are, what they do, and what they like. In fact, SMTEs have been repeatedly warned that failure is eminent if they believe that CRM is only a technology solution. A CRM strategy can help create new customers and more importantly, develop and maintain existing customers. Gaps in the literature review -
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The results of the study will have to be considered in the context of the South African and the Eastern Cape SMTE sector where various dimensions have an impact limited but few studies have been conducted. This study has found that there are very limited studies on CRM in SMTEs has been conducted in general, particularly in the Eastern Cape Province of South Africa.
Research methodology Research methodology according to Michael (2008) refers to the procedural framework within which the research is conducted, with the topic of research question being the primary factors when choosing the suitable research methodology. Given the focus of the existing diversity of CRM literature on enterprises in general and the sparse information available on the topic in the Eastern Cape, the secondary research findings will initially use the mainstream literature to develop a conceptualisation model. The study will follow a phased approach whereby, during the initial stage of this study an appropriate CRM model for SMTEs will be developed and refined; and during the second stage, research will be conducted to determine whether CRM contributes to the sustainability of SMTEs in the Eastern Cape province. Conclusions The need to better understand customer behaviour and focus on those customers who can deliver long-term profits has changed how marketers view the world. Winer (2001), states that the ultimate goal is to transform relationships into greater profitability by increasing repeat purchase rates and reducing customer acquisition costs. The overall goal of relationship programs is to deliver a higher level of customer satisfaction than competing firms deliver. Research has shown that there is a strong, positive relationship between customer satisfaction and profits. Because customers have more choices today and the targeted customers are most valuable to the organization, customer service must receive a high priority. There is a clear lack of research on customer relationship management among SMTEs in the Eastern Cape, and this paper serves to set a new focus on customer services, as it is evident that SMTEs in the Eastern Cape. Customer-centric knowledge management requires a positive attitude and a desire to extract value for the organization by managing customer relationships over time (Stefanou
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