Analyzing Customer Relationship Management; Topshop UK
Analyzing Customer Relationship Management; Topshop UK
Topshop is a well-established fast fashion retail firm that operates in the UK retail industry. The firm owns and operates a chain of over 300 retail outlets across the UK that specializes in selling a wide range of fashion products. The firm has developed a diversified product portfolio that is comprised of apparel, footwear, bags and accessories, and beauty products (Topshop 2017). In spite of the fact that Topshop has managed to achieve an optimal market position with regard to product pricing and good styling, the firm faces a challenge arising from the changing market dynamics. For example, Topshop faces competition from other firms operating in the same market segment. Amongst the major competitors include Mrs. Selfridge, River Island, H&M, Zara, and Debenhams. Moreover, the firm is also facing competition from emerging online retail firms. These firms target the same customer groups and sell trendy fast-fashion products. The increase in the intensity of competition has led to a decline in the company’s sales revenue. For example, at the end of 2016, Topshop’s sales declined by 11% (Topshop 2017). In an effort to develop a sustainable competitive advantage, Topshop has entrenched customer relationship management (CRM) as one of its strategic functions. According to Shanmugasundaram (2005), CRM refers to a business model that is aimed at aligning an organizations sales and product strategy with its customers’ product requirements and preferences. The firm’s rationale in entrenching CRM is underlined by the fact that it recognizes customers as one of the most important dimensions for its success. Topshop’s motive in entrenching CRM is to achieve a high competitive advantage by becoming customer-focused. According to Fayerman (2002), the contribution of CRM as a strategic function depends on how effectively this function is undertaken. This paper entails an analysis of Topshop’s customer relationship management.
Customer relationship management and its application by Topshop
The modern retail environment has become very dynamic, which is evidenced by the growth in the intensity of competition. To overcome the growing competition, businesses are increasingly considering the concept of customer relationship management as an approach to developing competitiveness. This arises from the fact that integration of CRM enables a firm to optimally differentiate itself hence increasing the likelihood of achieving an optimal market position. Customer relationship is an essential approach to increasing a firm’s sales revenue generation capacity.
According to Benning (2012), CRM entails an enterprise-wide business strategy that is developed with the objective of optimizing customer satisfaction and revenue by organizing a business’s operation around customer segments. Thus, the implementation of CRM may result in a change in an organization’s operational culture. Rajola (2003) asserts that CRM entails a set of organizational and technological mechanisms that are aimed at buffering or improving market instability by developing adequate knowledge of the prevailing environmental variables. Fayerman (2002) asserts that CRM is intended at assisting business organizations anticipate customers’ needs.
Developing relationship with customers is therefore critical in a retail firm’s effort to develop a competitive advantage. A firm can achieve numerous benefits by entrenching customer relationship management. First, CRM contributes to the development of store loyalty, which is characterized by repeat purchase behavior among customers. This aspect increases the likelihood of a firm generating high sales revenue (Fayerman 2002). CRM can contribute to improvement in a business organization’s overall profitability because of the high customer base. Fayerman (2002) asserts that CRM can result in a significant transformation of an organization hence improving its effectiveness in selecting, attracting, retaining, and growing its customer base. Thus, CRM can enhance a retail firm’s market position in spite of the changing industry dynamics.
CRM is also critical in businesses’ quest to develop valuable market intelligence. Switt (2011) asserts that market intelligence constitutes an essential element in developing competitiveness. Market intelligence entails gaining insight into the prevailing market and industry information. For example, entrenching an effective CRM can enable businesses to understand the customers’ product demands, complaints, and complements regarding the firm’s operation. Achieving this goal arises from the fact that CRM is based on the implementation of effective information communication technologies, which constitutes one of the dimensions of CRM. Fayemar (2002) accentuates that ‘CRM’s strengths lie in its required foundation that includes a robust database, network speed, automation of back office functions, internet acceptance, and communication technology’ (p. 58). Thus, in order to benefit from CRM businesses must implement effective CRM technologies with the objective of enhancing interaction with the customers.
The interactive technologies implemented enable businesses to establish a symbiotic relationship with customers, which is achieved through the maintenance of effective communicate with customers on different aspects related to the business operations. For example, interactive web-based technologies enable businesses to increase the target customers’ level of satisfaction. This arises from the fact that interaction with the customers improves the extent to which a firm becomes customer focused. Thus, CRM culminates in the transformation of a business into a customer-centric entity, which is critical in strengthening a firm’s level of return on investment. Chaudhry (2006) asserts that return on investment is essential in businesses’ quest to achieve competitiveness because it enables firms to adjust their operational and marketing practices. For example, a firm with a high return on investment can enable a firm to increase its investment in different operational and marketing activities. Increasing the level of customer satisfaction is one of the most effective strategies that a firm can enhance its return on investment.
According to Knox et al. (2007), CRM is critical in enhancing a firm’s effectiveness in ‘identifying, satisfying, retaining and maximizing the value of its firm’s best customers’ (p. 1). Additionally, the interaction that a firm establishes with the customers enables a firm’s management team to develop a comprehensive understanding of the target customer. The knowledge that a firm develops from the target customer subsequently shapes the firm’s future interaction with the customer. For example, knowledge of customers’ product tastes and preferences enables the firm to make effective decisions on the most effective approach to adopt in adjusting its product portfolio. From this approach, the likelihood of a firm generating high sales revenue in the future is increased substantially (Knox et al. 2007).
Implementation of a CRM strategy
To achieve the benefits associated with CRM, a firm must ensure that its implementation is based on a comprehensive CRM strategy. The CRM strategy entails the vision that a firm intends to achieve in entrenching customer relationship management as one of the components of its organizational culture. To succeed in creating an effective CRM strategy, business managers should take into consideration a number of issues. First, the firm should determine the prevailing information and interaction process between the firm and its customers. The rationale of assessing this aspect is that the firm gains insight into the possible gaps that might negatively impact how information flows to and from customers and the nature of interaction with the customers. Developing this knowledge is essential in making the requisite changes (Knox et al. 2007). Secondly, the firm has to ensure that effective customer service is entrenched. The motive of customer service is to enhance the level of customer experience hence increasing the likelihood of developing customer loyalty.
Development of CRM strategy should further entail transforming the firm’s approach to developing customer knowledge from a reactive approach to a proactive approach. This transition is essential in enhancing the effectiveness with which a firm responds to the changing market demands. Moreover, the process of designing a CRM strategy should further entail ensuring that the organization positions itself as a customer-centered entity. This aspect is critical in increasing customer loyalty. One of the ways through which a firm can achieve this goal is by training its employees on how to interact and handle customers’ requests and complaints. Finally, the CRM strategy should be progressively evaluated in order to determine its success and value to the firm over time (Knox et al. 2007).
Implementation of CRM at Topshop
In an effort to benefit from customer relationship management, it is imperative for businesses to entrench a comprehensive CRM ecosystem. The CRM ecosystem is made up of different components that include the operation, analytical, and collaborative components of CRM. Figure 1 below illustrates the CRM ecosystem that firms intending to develop a competitive advantage from CRM should take into account. Topshop is committed to developing market intelligence in an effort to be aligned with the prevailing market environment. Subsequently, the firm has incorporated an effective CRM ecosystem that is comprised of three components in an effort to enhance its CRM.
Figure 1; CRM ecosystem
With regard to the analytical component of CRM, Topshop has developed a comprehensive data warehousing system that enables the firm to gather information regarding the customers’ product demands (Retail Design World 2015). On the basis of this information, the firm is able to develop intelligence on how to adjust its product portfolio. For example, the analytical data warehousing component enables Topshop to understand and analyze the customers’ behavior. According to Rajola (2013), data warehousing provides a firm an opportunity to undertake data mining hence developing a better understanding of the customers’ product needs. One of the elements of data warehousing that the firm integrated includes data marts, which entail smaller archives that enable a firm to gather information on different aspects such as product and customer-related information (Katz 2014). On the basis of this knowledge, retailers can determine the most important channel to adopt in delivering products to customers. Additionally, data warehousing enables the firm to collect market information, which informs their decision-making.
The analytical component of CRM is also comprised of marketing automation and a campaign manager system. This component enables the firm to evaluate the product sold and potential customers who might be interested in the product. By gaining this knowledge, Topshop is able to make a decision on how best to adjust its approach to market segmentation. For example, using business intelligence tools, Topshop is able to analyze the data collected hence gaining insight on how to decide its various customer groups into homogeneous customer groups hence improving the firm’s efficiency in service delivery. For example, the firm can evaluate a segment of the market on the basis of the customers’ loyalty. Moreover, the marketing automation and campaign manager system enables Topshop to monitor the effectiveness of its marketing campaign.
Operational component of CRM
The market data collected by the analytical component is further utilized under the operational component of CRM. This is achieved by integrating customer interaction applications that enhance the level of front, back, and mobile office interaction. According to Fayerman (2002), the operational component of the CRM enables a firm to determine the customers’ product preferences and attitudes. Benning (2012) argues that undertaking a comprehensive customer portfolio analysis is critical in developing a comprehensive understanding of the customers. This can only be achieved if a firm has successfully entrenched the analytical component of the CRM. By gaining this knowledge, a firm is able to develop an updated version of the customers’ profile. This enhances the effectiveness with which a business enterprise transforms itself into a customer-focused entity (Kerr 2003). In addition to enhancing the firm’s effectiveness in adjusting the firm’s product portfolio, integration of the operational component of CRM enables Topshop to effectively undertake its support back office activities such as supply chain and order management.
In an effort to nurture a sustainable relationship with customer, the collaborative component is concerned with ensuring that a firm initiates and maintains interaction with the customer. Savvas (2011) asserts that interacting with customers is essential in nurturing a high degree of intimacy with the customer. The overall outcome is that a firm is able to design its products and services. Additionally, developing effective interaction with the customers enables a firm to successfully communicate its value proposition or what it intends to offer customers.
In an effort to achieve this goal, Topshop has entrenched push-technology systems such as pushing notifications on products available in the firm’s retail stores through emails. Through this approach, Topshop has been able to not only communicate directly with the customer but also to personalize its interaction with customers. Fayerman (2002) asserts that developing a personalized approach to developing customer experience is a major challenge that retail firms encounter. By adopting a personalized marketing approach, Topshop has been able to enhance the level of customer loyalty.
One of the CRM strategies that Topshop has entrenched in an effort to establish a relationship with customers entails establishing the My Topshop Wardrobe, which entails a feature that provides customers an opportunity to take a test aimed at determining their style. On the basis of the information that customers provide, Topshop is able to continuously generate personalized edits of the customers’ style. By developing My Topshop Wardrobe, the firm has been able to develop valuable information on individual shoppers’ styles. The new CRM technology has enabled Topshop to enhance customer experience. For example, customers are able to learn something new about their style by receiving personalized suggestions. The firm has provided customers an opportunity to either ‘dislike’ the suggestions on personal style. Despite the fact that customers may not always be pleased with the suggestions, the dislikes are an essential source of insight into customers’ tastes and preferences with regard to fashion. The firm is subsequently able to adjust the suggestion. The personalized approach to CRM has played a significant role in enhancing Topshop’s effectiveness in developing a personal connection with the target customers.
Succeeding in the contemporary retail industry requires firms to entrench effective business practices. Customer relationship management is one of the business practices that can positively impact a firm’s long-term competitiveness. Customer relationship management is concerned with ensuring that firm transforms itself into a customer-centric entity, which means that all the activities that the firm undertakes are intended at increasing the customers’ level of satisfaction. The outcome is that the likelihood of a firm developing store and brand loyalty is increased substantially. Customer relationship management further enables a firm to develop an adequate understanding of the customers’ product tastes and preferences. However, to benefit from customer relationship management, a firm must ensure that the requisite dimensions of customer relationship management are taken into consideration. Thus, a comprehensive CRM ecosystem that is comprised of analytical, operational, and collaborative dimensions must be integrated.
Topshop has incorporated an effective CRM ecosystem, which has significantly contributed to improvement in the firm’s competitiveness. The firm’s success in entrenching CRM has arisen from the integration of effective information communication technologies that enables the firm to understand the customers. Subsequently, the firm is able to align its product portfolio with the customer’s needs and demands. Moreover, the incorporation of the CRM ecosystem has enabled the firm to develop personalized customer relationships. For example, Topshop’s development of ‘My Topshop Wardrobe’ has enabled the firm to personalize its service delivery. Thus, the incorporation of CRM constitutes a critical element in Topshop’s quest to develop a sustainable competitive advantage hence increasing its likelihood of succeeding in an industry that has become very dynamic.
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