The purpose of this research paper is to analyze the impact of Customer Relationship Management (CRM) on BMW, as CRM is one of most effective strategic tools to change the consumer behaviour.
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This paper concentrates on the number of issues like conceptual framework of CRM, the adoption of CRM framework, CRM in the automobile industry, methodological framework, customer database, the effectiveness of CRM strategy on this company, the position of BMW, and so on.
Background of the Problem
The Sky News (1) reported that the luxury carmaker BMW has shocked with an 8% of its profit fall due to global financial crisis in 2008, and the company has aimed to overcome the situation by increasing sales, cutting its cost and reducing its staff within 2012.
With such a strategic alignment, it is suspicious whether the CRM practice of BMW would be collapsed or cut its existing standard. Under such a background problem, the aim of this research paper is to provide a clear overview of CRM about BMW to identify the best customers and their choice in order to offer best service to retain the loyalty of customers by maximising current and lifetime value of customers.
This literature review has been organised with following sub-chapters based on prominent authors and outstanding researches by most famous theoreticians of concurrent CRM study-
Conceptual Framework of CRM
Thompson, A. et al. (223) pointed out that the applicable definition of CRM has generated as a procedure of maximising customer’s values by means of concurrent marketing activities, integrating proper management of customer’s knowledge and information and maintaining long-term relation with them.
Starting from nineties, the corporate world has been keeping more emphasis on CRM as a fundamental component of Enterprise Resource Planning and the corporate houses taken huge imitative to standardise and categorise the informational resources with large investment with the aim to enable the corporate firms to prop up CRM as well as e-commerce to generate sustainable growth.
The Adoption Framework of CRM
Stoner et al (87) added that, there are four obligatory elements, which are essential for triumphant implementation of CRM and the four tools has driven from the theoretical framework of CRM implementation and these are demonstrated in the figure below-
Figure-1: Framework of CRM
Source: Stoner et al (87)
These four essential elements to successfully putting into practice of CRM at any organisation are concerned with – relationship marketing, apposite organisational structure, control of data warehousing and data consumption for customer management, and the four elements generate the framework of CRM necessary for any organisation that intend to implement.
The basic principal of CRM has put down on the philosophy of relationship marketing while the succeeding feature of CRM adoption has concerned with suitable organisational structure along with data warehousing is the third significant feature to the centre of attention on to effective formation of a triumphant CRM accomplishment and next to lay emphasis on data utilisation.
Limitation of CRM Implementation
Robbins and Coulter (214) addressed that the join up of the above four rudiments of CRM implementation should support the organisations to get better outcomes in their marking drives as well as business operations though there are a number of obstacles to introducing a CRM system for a particular organisation.
Nevertheless, the most awful limitations may include as lack of skills, malfunction to appreciate the benefits, insufficient investment, underprivileged quality of data, and poor evaluation structure where the skills for data shortage by using the new system is the most significant dilemma of CRM implementation
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CRM in Automobile Industry
IBM Business Consulting Services (8) explained that the CRM of automobile industry has turned just into a slogan in the rather than appropriate integration and evidenced that the sector has lacking with the understanding of the core values of CRM.
For automobile industry, CRM could be assessed as the organisational function aimed to get better customers focal point along with sensitivity and openness by analytically assembly and utilising customer’s appropriate data to creating value-add alternatives.
It is also observed that, among the auto manufacturers BMW and Volkswagen have previously put into practice of functions those are more than ever victorious in positive CRM concerns where the existing stepladders being occupied by the automobile CRM incorporated with optimising multi-channel features, supporting financial services, optimising dealers’ management along with combination of CRM with SCM1.
The contemporaneous automotive consumers are progressively hold greater information than ever about the market and have an extraordinary altitude of choice while customer loyalty has no more forward-looking approach in the automobile industry and thus the auto manufacturers and traders have to work hard to gain and retain customers in the competitive market position.
To interact with the tremendously high customer expectations in this ear, auto manufacturers, dealers, and traders are eager to provide efforts for CRM to ensure effectual marketing boosted sales and quality customer service.
The purpose of research methodology is to provide a brief description about process of report formation and this paper would follow Robert Yin’s case study approach to apply qualitative research approach with descriptive analysis.
However, Yin’s approach would assist to co-ordinate the knowledge with CRM theories because the discussion chapter analyzes the position of BMW Group considering both theoretical and practical perspective.
As the word limit and time is too short, this report will formulate only with secondary data sources due to availability of this sources with low cost and effort. In addition, these sources have already recognized by the publisher, therefore, this report will use several published management books of renowned authors, previous published research works on CRM issues, annual report 2010 of BMW Group, and so on.
To develop the product quality, service range and increase profits, BMW has been maintained CRM strategy since 1999.
Building a Customer Database
Building a customer database was the initial activities for this company to establish their relationship with the customers, and BMW has strong network with IT infrastructure, for instance, it uses the application of Siebel Systems to gather information about the customers.
BMW’s CRM Strategy in communicating with its customers
Most of the customers believed that after sales service of BMW was not that much satisfactory and few customers dissatisfied with BMW because the cars are user friendly and BMW would not like to provide prompt feedback (Finlay 1).
On the other hand, many the satisfied customers argued that they receive quick response from BMW about their problem and the company monitors their problem seriously and offered free service while they find appropriate.
However, one of the major problems of the company regarding efficient management of CRM is customers after buying the car want to share their problems of using the car with the company and BMW is not able to concentrate equally on all of the customers.
- The key reason of data analysis is to identify the different potential customers from different segment and BMW uses the modern concept of Life Time Customer Value (LCV) as the profit generated from each customer;
- However, Caly (1) stated that BMW also considers the sales volume and using the application system to calculate the customers how many times customer enter the site of the company for purchase and for other information.
Response to the Customer
BMW justified the claim that the response rates of BMW to the customers are not very good because dealers make the late though they quickly response in accordance with the customers’ demand.
Here it is important to mention that the customers buy BMW cars from the dealer point and the after-sale service also provided from the sales point; therefore, the customers contact with dealer to solve their problems and BMW gives the service through the dealer point.
There are many other factors reflecting on the CRM and the performance of the company, such as –
- The quality and design of the product is very significant from CRM point of view and BMW produces high quality premium car to attract the customers;
- BMW concentrates on the communication strategy, such as it sends massage to the existing customers regarding new product or services and all other issues and it has 24-hour call centre and web facilities to help the customers;
- BMW provides the opportunities to the customers to change or sale their old car to buy a new model from the company. However, it is also useful for those who do not have enough money to buy a new car and BMW offers new motor parts to the customer if necessary and it with less charge to the loyal customer of the company.
BMW’s position in terms of CRM compared to industry rivals
BMW has both direct and indirect competitors of different brands, such as, General Motor (GM), Mercedes-Benz, Daimler AG, Volkswagen Group, Honda, Toyota, Ford, Nissan, PSA Peugeot Citroen, Hyundai-Kia, Suzuki, Fiat, and Alfa Romeo etc. According to the annual report of GM Corporation (2009), all competitors have maintained CRM program in order to retain old customers and develop new customers for the company.
The market share of BMW Group and customer satisfaction rate are lower than that of competitors in the global market, which indicates that CRM performance of this company is inferior to the industry rivals. However, Buttle (28) stated that the relation with the customers reflected the sales volume share; so, profit trends and numbers of car sales indicate the success of CRM of the organization.
Number of car sales
According to the report of Shankar (1), Toyota Corporation was able to generate highest revenue in 2010 by selling the maximum number of car in global market.
In contrast, BMW was not in top ten automobiles though previous years it held sixth position in terms of car sales, which demonstrates the poor condition of CRM of the company as top ten companies produces similar cars and offers high quality products. The relationship of Volkswagen, Ford and Toyota with the customer is stronger than BMW and this company need to fill up this gap immediately to become market leader.
|Brand||Number of Cars Production|
|PSA Peugeot Citroen||3,325,407|
Figure 2: Numbers of car production
Source: Self generated
Figure 3: Market Share
Source: Bekker (1)
According to the annual report 2010 of BMW, the company experienced economic problem in 2009 due to global financial crisis but it has generated about 60.5 billion euro as sales revenue and more that 5094 million euro. However, most of the automobiles faced crisis in 2008 and recovered the position gradually but it is not in top ten for losing 12.77% market share in 2009 though BMW was in sixth position in global market.
Response to the Customer
For promotional activities, BMW highlights customer service and commits to provide any regular feedback when the vehicle in BMW’s workshop or local service centre though the company failed to ensure this; thus, customers become anxious and think to go paid up workshops rather than the BMW’s free service.
On the other hand, this company is less responsive to the market especially in the year 2009 where customer face economic problem and cannot afford high cost luxurious cars, but it did not reset its pricing strategy and showed any interest to produce low cost cars.
- BMW should develop a successful CRM program in order to increase sales revenue from new products and to protect the company from making unnecessary costs and decreasing its investment risk;
- As many customers have experienced late response from the BMW, it needs to take prompt initiatives in order to improve or adopt more effective data base system to collect and retrieve data about the customers;
- It is important to open more call centres to enhance customer care services and give the solution of the problem of the BMW customers;
- Development of communication skills is one of the most significant factors to develop global operation and to provide right message;
- It should check the CRM strategies of the rivals because competitors like Volkswagen and Ford took various CRM initiatives to boost revenue by integrating SAP software, ERP and other latest solutions;
- In addition, BMW needs to take technological advantages and integrates Microsoft [Dynamics] CRM;
- The management of BMW should increase budget for CRM program;
- BMW should strictly pursue the provision of Data Protection Act;
- The response of BMW to the customers should make quick to solve the problem of the customers; so, the company should arrange regular training program;
- To minimise customer’s tension, BMW ought to provide updates to the customers about their car while it is in service.
Successful integration of CRM system is one of the main factors of competitors’ success in terms of profit margin and market share. As the customers of this company show moderately satisfactory impression about customer’s service, BMW should improve its position by using latest software, and providing other services.
Bekker, Henk. The profit and market share of automobile market. 2009. Web.
Buttle, Francis. Customer Relationship Management. 2nd ed. London: Butterworth-Heinemann, 2008. Print.
Caly, Ralf. How BMW Channels Information to Everyone Involved in a Car Purchase: An Interview With Ralf Caly, Customer Think Corporation. 2006. Web.
Finlay, Steve. BMW Uses CRM to Aid Service Sales. 2008. Web.
IBM Business Consulting Services. Challenges for the automotive industry in an on demand environment. 2004. Web.
Shankar. Top 10 Highest Motor Manufacturers in the World 2011. 2011. Web.
Stoner, Finch, Freeman Edward. & Gilbert Daniel. Management. Delhi: Prentice-Hall, 2003. Print.
Robbins, Stephen. & Coulter, Mary. Management. New Delhi: Prentice Hall, 2003. Print.
The Sky News. BMW Hit by a Crushing Dent in Profits. 2009. Web.
Thompson, John., et al. Strategic Management. New Delhi: Tata McGraw- Hill Publishing Company limited, 2007. Print.
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