CHAPTER 1 BACKGROUND OF RESEARCH

1.0 Introduction Excellent customer service results in greater customer retention, which in turn results in higher profitability. Today, the market has changed. Customers have more choice and power against suppliers. As a result of this, profit and financial growth are more dependent on relationship with customer and less dependent on goods (ibid, p. 17).

Satisfying customers is critical to a firms success. Fornell (2001) posits that satisfied customers may be the most consequential of all economic assets; indeed, they may be proxies for all other economic assets combined (120). Firms that are unable to satisfy customers can expect to lose market share to rivals offering better products and service at lower prices. Thus, it is important for firms to understand what they can do to improve their provision of customer satisfaction.

Customer Relationship Management (CRM) Definition Customer Relationship can be defined in many ways. Some people stress the significance of information technology in CRM, some argue it means a customer-centric organisation, some believe CRM is a marketing strategy. CRM is an IT-enabled business strategy, the outcomes of which optimise profitability, revenue and customer satisfaction by organising around customer segments, fostering customer-satisfying behaviors and implementing customercentric process (Gartner Group 2004).

History The 1980s saw the emergence of Direct Marketing, heavily relying on client databases. Christan Gronroos and Evert Gummesson of the Nordic School and Theodore Levitt deserve a special mentioning in CRM. They were the first to describe Relation Marketing versus transaction marketing. Also they defined the characteristics of relation-centric organisations and they provided the corresponding marketing tools. In 1995, Treacy and Wiersema described their three Value Disciplines. Customer intimacy was one of them. As a result, CRM transformed in the 1990s from a web based contact management and information tool, to a customer oriented strategy.

Advantage and Disadvantage The strengths of Customer Relationship Management include strong relationships with clients offer a degree of protection against of competitors. Besides that, loyal customers can be more profitable. Winning new customers is expensive, satisfied customers may buy more; happy customers can bring additional customers.

There have three (3) disadvantage of CRM. First, implementing CRM in a holistic way is no sinecure. Second, making large a CRM investment profitable is difficult and the last one is achieving a sustainable competitive advantage with CRM is even more difficult.

2.0 Research Question Customer satisfaction has been identified as an important relationship marketing outcome. As such, firm such continually track and assess customer satisfaction. This research examines the impact of Customer Relationship Management (CRM) on the financial performance of manufacturing industry in Malaysia. The companies today must design and implement their own Customer Relationship Management (CRM) programmes to improve the quality and magnitude of their businesses. Hence, it is important to identify the types of CRM activities that companies can employ and to explore how these relate to company performance and profitability (Reinartz, Krafft and Hoyer 2004).

Many companies have implement CRM to create, develop and enhance relationship with carefully targeted customers in order to maximise customer value, corporate profitability and thus shareholder value. Each company has their own CRM activities, but is it each CRM that implement will give the higher benefit to the company and which type of CRM activities will contribute the higher benefit to the company?

3.0 Research Objectives 1. There is a significant correlation between customer satisfaction and financial performance for the manufacturing companies. 2. To develop a reliable and valid measure of CRM. 3. To use this measure in an effort to relate CRM with financial performance.

4.0 Scope This study will use a sample of 50 manufacturing firms from various different industry types. Manufacturing companies have faced increasing competition from local and foreign manufacturers. Thus, the manufacturing companies should emphasis on the performance measurement systems. Different types of industry at manufacturing companies have the different way of performance measurement. Although, a lot of research have been done on the manufacturing companies but it is still have a lot of space for us to make more deep research.

5.0 Contribution This result of study will be able to provide useful information for the new entry manufacturing companies in developing the Customer Relationship Management. Thus, the companies can design an effective and efficient CRM to maximize their profit. Besides that, this result can be a measurement for existing companies to find out the weakness of their CRM, hence to improve their current CRM.

CHAPTER 2 LITERATURE REVIEW

Customer Relationship Management (CRM) is one of the hottest tools in business today. But like total quality management and re-engineering before it, CRM has not always lived up to its hype (Brown, 2000; Swift, 2001). Still, companies ignore it at the risk of being left behind. Simply, CRM is a high-tech way of gathering mountains of information about customers, then using it to make customers happyor at least a source of more business. It is therefore, concerned with understanding and influencing customer behavior (Kotler, 2000).

Although CRM is the fastest-growing business tool satisfaction with its use currently ranks quite low (Winer, 2001). Many companies have started to realize that they need both the mountains of information on millions of customers as well as an appropriate technical infrastructure coupled with marketing expertise to use CRM satisfactorily (Zeithaml, 2001).

A true CRM solution design requires a complex combination of many best-of-breed components, including analytical tools, campaign management, and event triggers, combined with the many new components such as collateral management, rulebased workflow management, and integrated channel management needed to achieve a one-to-one marketing capability. This capability dictates the need for a single, unified, and comprehensive view of customers needs and preferences across all business functions, points of interactions, and audiences (Shoemaker, 2001; Tiwana, 2001).

As organizations move towards a comprehensive e-business environment, the business processes supporting the environment become increasingly, highly knowledge-intensive and therefore, an organizations long-term success and growth become dependent on the successful expansion, use, and management of its corporate knowledge across its business processes (Davenport and Grover, 2001; Liebowitz, 2000).