CRM in the Latin American Tourism Industry

Understanding the contributions that investments in Customer Relationship Management (CRM) software make as it relates to the sustaining and strengthening of loyalty on the part of customers for Latin American tourism providers is the basis of this proposal. Customer loyalty is crucial for the success of any business, yet it is tantamount in the area of tourism in Latin American nations. The creation and sustaining of customer loyalty over time in the Latin American tourism industry is measurable over time using the SERVQUAL research instrument (Ramsaran-Fowdar, 2007) and methodology (Carrillat, Jaramillo, Mulki, 2007). Applying SERVQUAL measures to Latin American’s tourists experiences and propensity to become more loyal over time is the basis of the proposed research effort, with the measurement of social networking and Web 2.0 technologies’ contribution to defining and executing effective marketing campaigns. Table 1: Web 2.0 CRM Applications in the Appendix section of this proposal provides an overview of the key Web 2.0 technologies that form the basis of social networking. The contributory effects of Web 2.0 CRM technologies on increasing SERVQUAL ratings for the Latin American tourism industry form the foundation of the methodology and structure of research.

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Problem Statement

Traditional CRM strategies for increasing and sustaining the loyalty within regional and national Latin American industries has ranged from the historical (Kelso, 2008) to the eco-conservatism based (Carr, Pederson, Ramaswamy, 1993). These tourism strategies are aimed at providing an enriching and fascinating experience of visiting Latin America to a true expedition-like experience that seeks to deliver ecologically-based trips. Across this spectrum of tourism services in Latin America is the need for consistency of segmentation (Sarigollu, Huang, 2005), effective and targeted use of e-commerce based online selling strategies (Stockdale, 2007) and the need for using more standardized measures of service performance including SERVQUAL (Carrillat, Jaramillo, Mulki, 2007). The essence of the problem that this proposal addresses is the lack of consistency in measuring customer satisfaction and loyalty across the Latin American tourism industry. This is made more complex by the reliance in the industry of relying on multiple channels and service providers to create the entire structure of the industry itself (Neslin, Grewal, Leghorn, Shankar, 2006). As a result of the lack of insight into a consistent measure of quality throughout the Latin American tourism industry there is also a corresponding lack of insight into how the demand curve for specific service offers compare to the price elasticity of demand in key markets (Raab, 2008). In short, the value drivers of Customer Relationship Management (CRM) strategies in the Latin American tourism industry are not quantified, much less codified into a series of strategies that are known to deliver exceptional results, an area of study often called best practices. In seeking to find the price elasticity curve of any served market for Latin American tourism services, marketers find the preference points for services (Raeburn, 2008). To date there is no actual link of SERVQUAL measures relating to CRM strategies based on traditional and Web 2.0 CRM applications as well.

Theory

This research effort seeks to create an equilibrium-based model that centers on the definition of value drivers (Richards, Jones, 2008) in CRM strategies specifically designed to create increased loyalty for Latin American tourism over the long-term using SERVQUAL (Carrillat, Jaramillo, Mulki, 2007) as the basis of the measurement and benchmarking. It is crucial for the study to seek to normalize performance and create a common baseline of performance across the CRM efforts of Latin American tourism providers so that the gap between CRM execution and needs for generating higher levels of loyalty be quantified and acted upon with subsequent strategies (Dimitriadis, Stevens, 2008). The need for an equilibrium-based model specifically to address how SERVQUAL can be used to create a baseline of service performance over time while taking into account the adoption of Web 2.0-CRM applications has the potential to significantly increase the effectiveness of Latin American tourism service providers’ strategies over the long-term.

Literature Review

The Rapidly Changing CRM Landscape

Latin American tourism providers are beginning to adopt one of the most noteworthy developments in CRM within the last five years, which has been the meteoritic rise of CRM-based Software-as-a-Service (SaaS). The market factors driving the adoption of SaaS over the traditional licensed approach to delivering enterprise-wide CRM applications is that the it Departments of many organizations are increasingly being called on to reduce costs more often than make selling strategies work. For the typical it department today their direction is to reduce costs first and when possible, help with business strategies. SaaS as a delivery model however circumvents the cost-reduction agendas of many it organizations and gives line-of-business managers including Sales, Marketing, Operations, and Service Vice Presidents, Directors and other senior managers from these ranks the power to bring applications in through web browsers. At the center of the dynamic growth of CRM through on-demand and SaaS is the shift in the balance of power in software spending in organizations (Lassar, Lassar, Rauseo, 2008). Today the line-of-business managers, especially Sales VPs, want to be able to develop and refine their selling and customer retention strategies quickly without having to rely on it. As SaaS is by nature the delivery of applications over the Internet and accessible through any web browser, Sales VPs are finding they can pilot and even deploy enterprise-wide CRM from the leading SaaS vendors including Salesforce.com, RightNow Technologies, NetSuite, Oracle due to their acquisition of Siebel and their CRM on-Demand application business, SAP with their unique hybrid approach to the on-Demand model that allows customers to have either single or multi-tenancy in their application deployment, and Microsoft Dynamics CRM. Of these vendors, many have predicted that Microsoft would eventually emerge as the CRM industry leader due to their commanding leadership in e-mail with Microsoft Outlook. In terms of the implications of SaaS-based CRM on the Latin American tourism industry the need for creating a consistently reliable and intuitively-based interface to websites used for booking travel is crucial for SERVQUAL measures of performance to be at their optimal levels (Kim, Zhao, Yang, 2008). SaaS can also revolutionize the adoption rate of applications within Latin American tourism service providers as well, which is a major concern for any new company adopting CRM as a strategy (Xu, Yen, Lin, Chou, 2002). Lastly, the SaaS platform can provide for exceptional insights into measuring SERVQUAL from the customers’ perspective, further providing data for the development of the equilibrium model this research effort intends to create, in addition to benchmarking of Latin American tourism service providers’ performance on SERVQUAL.

Defining CRM

What had begun as a series of applications aimed at capturing customer information has transformed into a series of strategies for attracting, selling, and serving customers. This transformation of CRM has been directly attributable to the change in which members of organizations are acquiring the software. When CRM was first created it Departments were the first customers, and the key success criteria of it are quite different than line-of-business executives who have profit-and-loss responsibilities for their companies. These line-of-business executives have transformed CRM from a series of applications to a series of strategies supported by applications, and this is a critical point in the evolution of this area overall.

There are many definitions of CRM and its components, yet one of the best is from Gartner Group. (Gartner 2001) defined a series of eight building blocks for CRM that are based on several excellent assumptions including the fact for CRM to be successful it requires being considered a strategy that encompasses all areas of a company at the enterprise level vs. just an isolated or siloed strategy. Gartner’s definition is shown in Figure 1.

Figure 1: Gartner Group’s Eight Levels of CRM (Source: Gartner, 2001)

Underscoring CRM is the role of analytics or metrics including SERVQUAL, as Gartner has labeled it in their model shown in Figure 1. There are Applications, Architectures and Infrastructure that are present at the next layer, and this is where SaaS-based approaches to delivering applications are taking hold and growing rapidly. The next layer, CRM Information, supports the redefinition of CRM Processes. In effect both CRM Information and CRM Processes work in conjunction with each other to support customer experiences and organizational collaboration, two strategic areas that have served to transform CRM from a series of applications to a series of strategies. The additions of the top levels, CRM Strategy and CRM Vision have more to do with the progression of CRM’s many applications into tools for line-of-business managers vs. being purely applications. While this definition has begun at the bottom of the model and worked progressively up the model’s layers, CRM strategies work best when CEOs take ownership of and champion the adoption of customer-centered strategies and selectively layer in technologies to accomplish their goals. Jakobson (2007) in his analysis highlights the dual nature of CRM and the contributions of CRM moving a company’s goals through strategies, to plans, objectives and finally tactics. In effect Jakobson “reverse engineers” the strategic vision of CRM to show how it can tactically be applied to selling situations. The crux of his research focused on the technological aspects of CRM supporting is the essence of rising above all these other forms of unwanted communication and staying relevant for the long-term to prospects and customers.

Research Design

The proposed research design will focus on interviewing approximately 500 customers of Latin American tourism providers in the last twelve months and assessing their relative levels of satisfaction using a survey designed using the SERVQUAL methodology. Using a series of questions included in the SERVQUAL instrument to focus on the ten aspects of service quality including reliability, responsiveness, competence, access, courtesy, communication, credibility, security, understanding the customer and tangibles of service. Consistent with the goal of this study to focus on the gap between service delivery ad expectations (Huang, Sarigllu, 2008) the research design will be stratified by originating nation of the respondent. This stratification of responded by country will be useful in using Hofstede Cultural Dimensions (Blodgett, Bakir, Rose, 2008).

Methodology

Relying on Simple Random Sampling to stratify the respondents across the top ten nations that have visitors to Latin America as tourists in 2008, the research methodology seeks to be representative to those regions of the world who have cultural factors that lead to high levels of loyalty already. As was mentioned earlier, the Hofstede Cultural Dimensions Model (Blodgett, Bakir, Rose, 2008) will be used during the analysis phase of the results to further delineate and explain the variations in countries who have the majority of visitors to Latin American nations.

Second, the respondents will be obtained through Latin American nations’ tourism offices, specifically those who have e-mailed these offices asking for packets of information. A cross-section of the top ten service providers will also be contacted for respondents as well.

Third, the survey will be sent via e-mail and also by mail when mailing addresses are available. A $5 Starbuck’s card will be offered to those respondents in nations that have outlets from the coffee chain. The Latin American tourism offices and service providers will be asked to donate the costs of these incentives as the summary of results will be shared with them. On those nations that do not have Starbucks’ the incentive will be a $5 gift card on Amazon.com also underwritten by Latin American service providers.

Results will be captured in Zoomerang, a free online service for capturing survey data. In addition, the free downloadable version of SPSS Version 16 will be used for analyzing the results. The use of basic and advanced statistical analysis functions will be used throughout the analysis phase.

The following hypotheses will the basis of the research:

Hypothesis 1: There is a statisticallysignificant relationship between existing CRM strategies and a baseline level of performance as measured by SERVQUAL that shows the need for greater conversation levels with loyal customers.

Hypothesis 2: Customers who visited Latin America in the last twelve month prefer to get their travel information through Web 2.0- technologies over traditional means of media.

Hypothesis 3: SERVQUAL performance is higher for those Latin American tourism providers who use Web 2.0 technologies and social networking as part of their core strategy.

Expected Results of Research

With the objective of defining a benchmark level of performance with regard to Latin American service providers that can be standardized on SERVQUAL, it is assumed that this will be accomplished through the methodology of this study. The implications of social networking and Web 2.0 technologies on customers’ changing preferences for how they communicate with Latin American tourism service providers will show significant upside potential for these providers to change their strategies to speak with customers globally how they prefer.

Appendix:

TABLE 1:

WEB 2.0 CRM APPLICATIONS

Applications

Descriptions

Blogs

Online diary or journal entry on the Internet, which primarily supports text, photo (photoblog), video (vlog), and audio (podcast) formats

Google, AOL, and Yahoo offer free blogging platforms

Mashup

Web service that gathers related content from more than one source

IBM’s mashup applications enable project managers to match team resources with a map to identify the geographical locations of the resources

Peer-to-Peer Networking technique for effectively sharing music, audio, and text files

Napster and Gnutella are popular peer-to-peer networks

Real Simple Syndication (RSS)

Feed-based technology that, with the aid of an RSS reader, enables users to subscribe to newly released content such as text, Web pages, sound files, photos, and video

RSS feed may contain the full content, for example a podcast, or simply a link to the content

Social Media

Encompasses all online tools (blogs, podcasts, Wikis, social networks, vlogs) and Web sites enabling people to share content, such as text, audio, picture s, and videos

Popular social media sites include YouTube (video) and Flickr (photos)

Social Networking

Web sites that permit users to create online networks and communicate with friends and colleagues

Social networking sites include MySpace, Friendster, Facebook, and Friends Reunited, and business networking sites include LinkedIn and Ryze

Tagging

Allows users to bookmark or rate online content to share their recommendations with other online users

Typically used by publishers of media sites attempting to benefit from users’ recommendations

Popularized by sites such as Digg and del.icio.us, which enable users to publish, categorize, and share their bookmarks

Wikis

Enables users to create and edit the content of a Web site, leveraging the expertise of online users

Consumer Wikis enable users to comment on content, in addition to editing content

Wikipedia, a community Wiki encyclopedia, includes approximately 1.3 million English-language articles

Sources: (Josh Bernoff, Charlene Li. 2008, et.al.)

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