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Betriebswirtschaftsle­hre

Hong Kong Polytechnic University - PolyU HK

Year 4

Dominique W. ©
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The Hong Kong Polytechnic University

MM4781

Sales Management

Customer Managed Relationship (CMR)

Content

Introduction ---------------- P.2-3

Case study ---------------- P.3-5

Summary of the two articles ------------- P.

Managerial implications ------------- P.

Conclusion --------------- P.

Reference ------------------ P.

Introduction

Customer relationship management (CRM) is a concept that achieved more recognition in late 1990s. CRM is of paramount importance for firm success. However, there is still in lack of a generally agreed definition of CRM. Law et al. (2003) points out that there are 3 major different views of CRM and there is no a concrete definition of CRM yet. However, Law et al. (2003) suggested that all three perspectives acknowledge that CRM is indispensable from the use of information technology.
Law et al, (2003) pointed out that traditional CRM starts from the firm’s perspective, pushing the product and service to customers, such as the B2B and B2C models.

They argue that modern CRM should adopt a Customer-Managed Relationship(CMR) approach where firms make customers as the starting point and understand what they need (C2B model) rather than pushing products and services from the firm to customers. In CMR, customers informs firms what they want individually and firms’ duty is to provide assistance and suggestion to help the customers to solve the problems, and in this way, relationship can be developed.

The authors also suggested that companies should mainly focus on identifying and working with the highest-value customers, and to maintain value-added relationships with them. Also, in order to enhance competitive advantages, a firm need to develop strong networks with other parties to provide a larger service package for customers. Therefore, it is vital to create a co-creative environment so that the linkages of customers, companies and other parties can be firmly connected.

The difference between CMR and CRM can be shown in the table below.

CMR and CRM difference

CRM Perspective

CMR Perspective

Company is in charge

Customer is in charge

Focusing on the quantity of customers interacted

Focusing on the quality of customers interacted

Customers are treated as segments

Customers are viewed as individuals


Companies push products and services to customers

Customers tell the company what they need and value

Company focuses on transactions

Company focuses on customer’s individual needs

CRM gives more advantage to company

CMR gives more advantages to customers

This report will use Cathay Pacific as an example to illustrate how can a company effectively adopt CMR in their CRM. Then we will summarise two related articles and provide managerial implications of adopting CMR in CRM.

Case Study: Cathay Pacific

Cathay Pacific has always been ranked top on the lists of best airlines by various authority around the world. In 2012, this airline company was awarded ‘Airline of the year’, and Cathay Pacific’s success in airline industry is indispensable from the quality of customer service. CRM is one of the aspects that leads the airline company to achieve the position where they are today, their customer-loyalty offer program and efficient global call center are the examples of successful implementation of CRM strategies.

For instance, Cathay Pacific’s occasional frequent flyer programs and discount scheme, ‘Tuesday Fanfare’, ‘Pop up and go’ are the CRM strategies implemented to build their brand within different targeted customer groups , such as students, retiree and businessmen. These programs will provide different groups of customers with incentives that are relevant and practical to them and eventually to create sustainable competitive advantage against rivals and budget airlines.


In order to expand greater market shares in fierce competitions with budget airlines, Cathay Pacific has also begun to transform their CRM approach to CMR approach. As mentioned previously, the examples are programs decided by Cathay Pacific based on the targeted customers they wish to satisfy. Cathay Pacific understands that the niche markets of budget airlines are created from the concept of giving what the customer's request, instead of ‘one size fits all’, like the traditional operation of airline companies.

Cathay Pacific has demonstrated its “Focus on customer, gain customers” customer strategy that adheres with the concept of Customer-managed relationship. One of the successful campaign done by Cathay Pacific is which offer 10,000 free air tickets to users in exchange of two million finished customer feedback forms to the database (Cathay Pacific, 2013). Company can depend on personal data to gain deeper understanding of its customers and enlarge the knowledge towards customer preference, behavior, flying pattern as well as their demographic characterics.

By leveraging on these constructive data, airline company can provide high quality interaction management with targeted customers, conduct future business plan, and build closer relationship with customers.

Marco Polo Club, is an exclusive service offered by Cathay Pacific to retain loyal customers and to attract more of them and the service is another approach of CMR, which customers get to choose the benefits accordingly. The benefits and privilege offered by Marco Polo Club varied from four categories, ‘Green, Silver, Gold and Diamond’. The benefits include priority waitlisting, luggage upgrading, lounge service and occasional promotion offers, most frequent flyers would show interest in Marco Polo Club as they will have more flexibility in managing and arranging their trips and get to enjoy premium services.

Besides that, the development of electronic transaction platform has also become a very crucial component to Cathay Pacific’s business, regular customers can also manage their flights based on their preferences and Cathay Pacific will offer the services accordingly. (Cathay Pacific, 2013). Through utilizing e-service platform, a wide range of service is delivered to customer with the assistance of information technology, such as online ticket booking, online boarding, luggage package purchase, food ordering, seats selection, frequent flyer program, flight departure reminder via SMS and etc.

The platform provides customers with services that removes the hassle of getting on board, and create a joyful flight experience for them, hence building trust and satisfaction as well as gaining higher customer loyalty.

The above illustrated examples indicated Cathay Pacific’s approaches in implementing CMR in their business and aim to serve different customers with different preferences in flight service.

Summary of the two articles

Summary of Article 1: Customer Empowerment in the Digital Age

Many brands are now utilizing social-media platform to create involvement opportunities where they can interact with customers in an efficient manner. But a more visionary step, as asserted by the editor, is to empower customers. This means shifting the control of the company’s product development to its customers. Brands hand discretion on to customers for irresistible reasons.

First, customers tend to value and admire their creations more, and psychologically, they would experience ownership of certain product when perceiving their engagement. Second, empowerment is followed by inspiring results, such as word of mouth and purchasing behaviors. Finally, by empowering customers, brands would further improve marketing processes through including customers’ creation and insight in these processes.

In addition, the article also implies that customer-managed relationship is inclined to be crucial in the foreseeable future as customers are better-informed than ever before. In other words, customers are willing to play an active role in the marketing communication process.

In reality, marketers would like to approach and engage customers as many as they can. To achieve this, the editor proposes adopting both broad and deep strategies so that brands can satisfy and leverage the potential of both the customers who intend to deeply engage and of those who merely intend to be involved without committing an abundance of time, effort and resources.

Customer empowerment cannot always exert positive influences on the brand image, and thus entails comprehensive implementation with prudence. In order to effectively make use of empowerment, brands can offer initiatives, such as crowdsourcing, co-creation, and brand communities, to strengthen its connection with customers. However, successfully incorporating customers into marketing processes requires normal customers to know that other customers are empowered.

Therefore, brands would need to articulate this clearly and prominently. Brands should signify that they attach much significance to the insight provided by customers, otherwise, aversion and other side effects may arise. Accordingly, marketers can choose to reveal whether and how customer insights are utilized and even give solid evidence for having implemented the insights.


Many firms are adopting Customer Relationship Management (CRM) to enhance their relationships with their customers due to the intensified competition and the change of purchasing behavior brought by electronic commerce. However, traditional CRM cannot go beyond firm level of completeness and there is insufficient knowledge on customers’ purchasing behavior. Therefore, to generate a more sustainable business, two-way interactions are recommended between customer and the vendor.

CRM should stand along with customer-centric approach called customer-managed interactions (CMI) to generate successful business operations. Here, customers have full control over the data about their previous transactions and their expected needs in the future, and distribute this information to the chosen firms when they are interested in doing business. In order to implement CMI effectively, the paper addresses that both customers and vendors need to take actions.

There are six factors that can impact the implementation of CMI, listed below:

1.Customer acquisition of the data: Customers must keep electronic records of the items they owned.

2.New organizational process: On vendor’s point of view, the effectiveness of CMI depends on how the vendor uses advising and flexible pricing capabilities to respond to their customer’s request.

3.Cost control: Service delivery costs drop significantly due to the shifting pattern of providing more service through Internet rather than ordinary human labor. Therefore firms should establish a low cost, software based system business models to assess customers’ interactions.

5.New policies: Companies will be required to implement standards or policies that can best describe their products and services to enhance supply chain efficiency. This is because CMI is based on high volume transactions especially targeting supply chain automation.

6.Trustworthy intermediaries: Intermediaries are required to handle connections between customers and vendors. At least one electronic intermediary and a national bank are required as intermediaries.

Managerial implications

  1. The differences between CRM and CMR: The now and then

1.1 Global business environment: Comparing the past and now

The rapid development of the Internet is transforming the the global business environment into a continuously evolving cyber world (Ellsworth, 1996). According to World Bank (2016), in 1995, less than 1% of the world population has an internet connection and it was around 40% in 2016.

The number of global internet users per year since 1993

The increasing applying of information and communication technology links consumers in various places and provides companies an interactive dialogue with consumers, leading to greater decision power of consumers (Kurt, 2012).

1.2 The shift from CRM to CMR

The main difference is that consumers are passive in building relationship in CRM and companies regard consumers as a active group in CMR.

Traditional CRM starts from the firm’s perspective, for instance B2B and B2C (Singh and Sirdeshmukh (2000). As a worldwide network links consumers around the world, the relationship pattern is many-to-many, which means that a company tries to reach numerous consumers. The main problem is that it is difficult for companies to satisfy consumers because of too many focusses.

In addition, Peppers and Rogers (1993) state that companies build with individual customers as one-to-one. It means the relationship between companies and consumers or one between consumers and companies. However, this approach requires a deep understanding of individual consumer’s needs.

Prabhaker (2001) believes that companies need to switch from CRM to CMR due to an evolutionary change in the cyber-world. Today’s companies accept CMR in order to build more transparent connection with consumers who have increasing decision powers.

2. Application of CMR in real life

2.1 Building strong connection with customers in CMR

In today’s business reality, the concept of one-network-one are true and important, as the technology bring a lot of information to the customers, such as competitor’s product and product review, making building relationship between customers and company becomes complex.

The way to survive in CMR, as Malthouse, Haenlein and Skiera et al. (2013) suggested, it is crucial for the company to manage customer engagement, so as to overcome the ‘network’.

The dilemma for the company in engaging customers in CMR is that the customers are no longer passive in building relationship, but they actively control the relationship building. Therefore, it is suggested that the company can use technology to allow customers connecting with their company with more involvement. (Gupta, 2009)

For example, Starbucks application allow customers to reload funds, find stores as well as invite them to try new product, so that the company can actively approach potential customer and they would increase their spending on Starbucks due to the encouragement.

2.2 Provide better business outcome in the era of customer empowerment

Customer empowerment is important element to achieve CMR, as the customers should have their chance and right to express their needs and play an active role in product development. (Netwell, 2003) The company should have some strategies that show willingness and gratitude to cooperate with customers.

Chernikov, Kushch and Tikkanen (2015) suggested that the successful company would be open to the customers, while less successful company would “polish the surface and pretend”. Therefore, it is important for the company to manage customer empowerment and bring positive effect to company performance.

The company should be teachable, timely and be transparent. The customers should be allowed to make choices or collaborate with the with fully understanding of the related information as well as build trust with the company. (Fuchs & Schreier,2011)

McDonald is one of the brilliant example who try to well inform the customers, so as to increase the transparency of the company and build reputation. The campaign “Our Food, Your Question” allow customers to ask question about McDonald’s food, such as food manufacturing process and nutrition information, and the company would answer the question quickly.

2.3 Changing the role of customer from passive to active

Co-creative approach is the starting point of changing the engagement of customer from passive to active. Kuula and Haapasalo (2016) found that, co-creative allow each customer to design their own service plan or product to create the experience base on their own desires and preferences.

Disney did well in co-creative approach. Disney launched an app called “My Disney Experience”, which allow the customer to customize their own schedule and experience in Disneyland. The function includes making reservation for dining and hotel, getting fast pass, making booking for photo taking with cartoon characters and even making memorable photo album for each journey in Disneyland.

By using this app, customers can plan their own journey based on their needs and preference to create their personal experience. Of course, shows and attractions consisting in their plan should be existing and offered by Disneyland. The journey in Disneyland is now leaded by the customers themselves, instead of just follow the package designed by company. This will enhance the engagement and involvement of customers and the uniqueness of every trip.

2.4 Putting customers at a high hierarchy

The role of company is to be a listener in CMR, customers will be treated as the leader of pointing the direction for the company development. Hunt and Cooke (1990) mentioned that being customer-focused will help company to provide better services and products, getting source of new product idea and opportunity of improvement and hence to increase customer loyalty.

Newell (2010) stated that by implementing CMR, the mission of the company is to provide services or products which can serve the needs of customers, instead of what the company want to provide. Indeed, listening to customer is not enough, establishing changes base on the opinion from customers is needed also.

The sales associates and store managers in Zara will listen and jot down the opinion of customers, including what materials and cuttings they want for the new clothes they launch. Observation of the styles which the customers wearing is also the duty of the employees in Zara. The design of new products will combine the comments and observation. By doing this, Zara can provide customers suitable products.

3. Difficulties and tackle of CMR execution

3.1 The orientation of customer

Modern CMR has handover the dominance of product from manufacturer to customer, and the requirements of each consumer are not the same, so products will be diversified. However, the higher requirements for a product will increase the price, therefore CMR no longer use low prices as a competitive approach. Companies should identify high value customers and meet the specific needs of each customer as a competitive strategy and that is the difficult part of CRM transforma to CMR.

For this purpose, companies can though membership registration, promotions and lottery channels to collect customer’s data such as income, preferences, spending patterns, etc. Then, divide customers into different levels and focus the limited resources on high-value customers. For example, continue pay attention to their behavior to make proper response or hold an appropriate market activity to attract high value customers.

The above mentioned Marco Polo Club has distinguished four membership levels and credit card grading are examples of differentiating high value customers.


In order to allow customers a more diverse and convenient choice, companies should maintain linkage with parties in various areas, but this will also increase the cost of the company. These parties’ products or services should relate with the company business that not only facilitate customers, but also strive for higher opportunities of selected by customers. However, the quality of products or services by other parties is difficult to control.

It may cause the company was complained due to other parties mistakes. To tackle this problem, it should be careful when choosing external parties, such as learn more background about parties, and choose a good reputation parties. Cathay pacific has collaboration with Hertz (Multinational corporations of car rental agencies in over 150 countries) and Chubb (Insurance companies with operations in Hong Kong for over 90 years) to provide trustworthy one stop service for travel to facilitate customers and enhance the competitiveness of the company.

3.3 The strategies of management approach


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