Increasing customer value of current
International Accounts at Randstad Holding
“A study on the internal marketing and relationship
management processes of the International Account
Management department of Randstad Holding”
Rijksuniversiteit Groningen
Faculty of Management and Organization Marketing Department
Academic Supervisors at the Faculty of Management and Organization: Drs. M.E. Boon, first attendant
Drs. H.C. Stek, reviewer
Corporate Supervisor at Randstad Holding:
Drs. J.B. Bultsma, Senior International Account Director Mentors at Randstad Holding:
Drs. A.H.T.G. Janssen, Service Manager International Accounts Mrs. E. Hesseling, Service Manager International Accounts Author: Daniël S. Heijne
“The only real valuable thing is intuition”
Preface
The document lying in front of you was written during a six months internship at Randstad Holding, the International Account Management department, in Amsterdam. It is the result of research performed to finalize my education at the Faculty of Management and Organization at the Rijksuniversiteit Groningen.
This research report is a study on the internal marketing and relationship management processes of the International Account Management department. The goal is to recommend the department on improving these processes to increase the customer value of current international accounts.
I am very grateful I was able to do my graduation project at the IAM department. It has been an inspiring environment to do my research. I finally was able to translate my theoretical knowledge, especially in the field of Marketing, into practice. During my internship at the IAM department I have been able to practice and develop my skills in an international business environment and enrich myself as a person in six great, enjoyable and intensive months. Because of my wonderful experience at Randstad Holding, I now feel ready for the next step.
I owe all people of the IAM department and other people of Randstad Holding I have worked with a big thankfulness for helping me to achieve the results and good companionship. I will not name all people I have worked with. There are so many of you, that I fear I might to forget to mention someone. However I would like to thank a few people by name:
•
Jelle Bultsma, senior international account director of the IAM department and prospective director strategic accounts, and my corporate supervisor at Randstad Holding. I would like to express my gratitude for offering me this fantastic internship and guiding me through this research process. Thank you for the opportunity to carry out this research and to learn and work in such an inspirational environment. I have learned many things from you in these six months of internship. The most important lesson I have learned is to make ideas feasible and comprehensible. In the future, I hope to work with similar professionals, who are able to transform good organizations into great organizations.•
Astrid Janssen and Esther Hesseling, thank you for your daily guidance, in helping me to reach the level of knowledge that was necessary to produce this thesis, and for your warm companionship during this process.•
I would like to thank Dhr. Boon (first attendant) and Dhr. Stek (reviewer) of the Faculty of Management and Organization for their constructive views, recommendations and feedback, that guided me through this research process.Last but not least a warm and special thank you goes out to my parents for creating an environment where my knowledge could grow optimally, for their love, endless support and encouragements during my study.
Daniël Heijne,
Management Summary
BackgroundThis research is part of a graduation project for the Faculty of Management and Organization at the Rijksuniversiteit Groningen. This research has been performed at the International Account Management department at Randstad Holding. This department is the single point of contact for dealing with international requests for information and quotation. With clients being increasingly cost conscious and with the centralization of procurement of many services, it is crucial to offer cross-border service agreements, based on quality and cost efficiency. All Randstad Group countries work together on International Account Management (IAM). The IAM department offers the international customer base a strong proposition generated by cost savings and added value.
Reason for research
The IAM department has officially started its operations in January 2004. Because of this relatively short period, there is no strong and systematic managerial setting for international accounts. Various account management processes, especially the internal marketing and relationship management processes, are nontransparent. There is a strong belief that these invisibilities lead to losses of profit and revenues. The IAM department wants to take up a pro-active position in relation to the international accounts. This means that the department wants to control the situation by making things happen, rather than reacting to them. Therefore the IAM department acknowledged a need of a better and clear understanding of the activities that are undertaken by IAM employees concerning the international accounts and of the improvements that can be made in this field. As a result, here of strategical choices can be made to increase customer value of current international accounts through the IAM department.
Reseach goal
Based on the background information and the research the following research goal has been formulated:
“Analyze the relationship management and internal marketing management functions of the International Account Management department and give recommendations on improving these functions to increase customer value of current international accounts.”
The research question of this thesis to fulfil the main research goal runs as follows:
“How can the relationship management and internal marketing processes of the International Account Management department be improved in order to enhance and increase customer value of current international accounts?”
Research body
Noting that international accounts are of strategic importance to Randstad, this implies that specific account managerial activities have to be used to acquire, retain and develop these accounts. In a preliminary investigation it was discovered that internal marketing and relationship management processes are extremely important to the enhancement of customer value of international accounts.
After this preliminary investigation studies have been examined in the theoretical frame. These studies are about two issues. The first issue is about internal marketing and relationship management perspectives that deal with the creation, enhancement and increase of customer value. This is actually about the question how value can be created. The second issue is about strategy development. This is about which value an organization wants to add to their customers.
Out of three formulated criteria these theories have been discussed and evaluated in further research. It appeared that the ‘relationship management chain model’ of Payne, supported by several other theories, covered all elements of the main research question. Therefore, this theory has been used as the main research model, which supports the conceptual model. The next step that had to be taken was to gain a clear insight in the current internal- and relationship management processes of the IAM department through an intensive analysis. The qualitative research method that has been used to gather information is the so-called ‘brown paper session’. Due to these sessions and the conceptualization, every effort has been made to obtain this insight in the above-mentioned processes. The results have been used as an important input and therefore are the basis of the final answers and recommendations that are given in chapter nine.
Conclusions
It appeared that four central issues have a great impact on internal marketing and relationship management processes of the IAM department. The four are strongly linked to each other. These are: Value, objectives, activities and segmentation. These issues can be summarized in four central problems:
1. There is no clear understanding among IAM employees of the value definition, what the added value is that Randstad offers in customers’ perspective and how they can act properly in the context of their accounts.
2. Personal objectives are not enough in line with the strategic goals of the IAM department, which in this case is the building of long term relationships and the increase of customer value of current international accounts
3. Activities are not integrated and coordinated in a structural manner and so there is a need to standardize and centralize some activities. However, employees are not able to define these activities. Besides, a lot of tacit knowledge is present within the IAM department, which is useless for the corporate business.
4. International accounts are not ‘top of mind’ throughout the whole organization, because there is a lack of support of the segmentation model.
The IAM department has to be clear about their specific value focus in the relationship with the international accounts in order to optimize activities, processes and resource allocation. When value is well defined and the IAM department knows exactly which value or added value they can deliver to their international accounts, this should be translated into clear objectives. If objectives have been set, it is possible to determine which activities have to be executed in order to achieve these objectives. Then it is possible to ascertain which activities can possibly be standardized in a back office.
Recommendations
This research project lead to recommendations for the International Account Management department and to recommendations for further research. The following recommendations have been made:
- Recommendations for the IAM department about the internal marketing processes
- Recommendations for the IAM department about the relationship management processes
Recommendations for the IAM department about the internal marketing processes:
• The value concept has to be clearly communicated throughout the whole IAM department. It is the purpose that all employees think actively about value creation. Workshops should be organized to roll out this concept, directed by strategic thinkers. A possible workshop can be a ‘consultative selling workshop’, because employees will actually learn how to get into the mind of a customer. The workshops have to cause an elimination of the account directors’ short-term sales focus. It is about strategic partnerships that in the end are really profitable in the long run and can realize an actual increase in customer value.
• The representative of the IAM department at the executive board of Randstad Holding or top management has to compose a profile and determine which core competences employees should have to reach main goals of the IAM department. Then they should actually determine if current account directors comply with the desirable profile. If this is not the case, perhaps the above-mentioned workshops can cause a desired change among these employees. Furthermore, attention has to be paid to the fact that different phases in business relationships actually require different types of employees. This implies that perhaps different types of employees are necessary during different levels of maturity of an international customer.
• The long-term goals of IAM have to be translated into specific personal long-term goals and short-/ medium term objectives for Account directors. If objectives and goals are actively formulated in consultation with all employees, this will urge account directors to name activities that need to be undertaken to achieve these objectives and goals. Then it will be easier to determine which activities can possibly be standardized. Furthermore, this will prevent or at least curtail the measure in which employees act on just feelings or emotions.
• The executive board of Randstad Holding has to improve their communication about the segmentation model for international accounts across the borders towards Opcos. Starting point should be a clear message from executive board level among which an explanation about the worldwide market in which Randstad operates and the increasingly important role IAM plays in this perspective. For the IAM department this has two implications. Firstly, Opcos will be more at a same wavelength. This means the IAM department will experience lower resistance, which makes work more efficient and effective, and probably contributes to an improvement of results. Secondly, Opcos will not only be encouraged to address their specific requests for international focus on some of their respective national accounts to the IAM department, but will also respond much more actively to these encouragements. • Account directors should take notice of the IAM Back Office presentation. This will
eliminate any amount of misunderstanding by Account directors about the formal tasks of IAM Back Office.
• IAM should bring in focus their international accounts. Starting point must be a pro-active pre-selection of accounts that are highly profitable in the short- and long term. Besides, because of the fast market growth, IAM management should examine if the current employee occupation, settled two years ago, is sufficient enough for the market in which they operate nowadays.
•
The market in which IAM acts demands fast answers and actions. Therefore, IAM Front- and Back offices have to be put together at one location, so that communication processes between these offices will be improved. Besides, it will be easier to determine in consultation with all parties which activities can be standardized.Recommendations for the IAM department about the relationship management processes: • A CRM tool or program has to be developed, because the IAM department has to
measure customer profitability, customer behaviour, customer satisfaction and customer focus so that they can be managed and improved. Therefore, process control techniques are also needed. Besides being helpful in measuring the mentioned customer concepts, such a tool could also be helpful in sharing information, knowledge and experience across borders. It would be a desirable tool because it gives insight and accessibility into international account/customer information. Furthermore, a clear agenda of marketing communications activities from IAM and the Opcos towards the international clients and the mutual adjustment of these activities can be mapped. This tool will improve internal communication as well as external communication processes. If employees actively work with such a tool, this will also reduce the amount of present tacit knowledge.
• To intensify the relationship with international accounts, offering management reports and the arrangement of quarterly reviews with international accounts can be helpful. This will urge a sense of involvement in the international accounts, which can be helpful in heading for strategic partnerships.
Recommendations for further research:
• Undertake a customer satisfaction survey among current international accounts - Map the findings about the (added-) value of Randstad from customers’ perspective
- Compare these findings with corporate and IAM long-term objectives and estimate if these goals can be reached with these international accounts
- If possible, head for strategic partnerships Steps to take in the near future
It can be concluded that the IAM department should focus on the value creation of international accounts. This implies improving the performance of the international accounts by reducing their HR-TCO and increasing their business revenue. On the basis of several value sources, the IAM department has to offer tailor made solutions for their international accounts to create a sustainable amount of customer value.
In the near future, the IAM department needs to know which are the specific needs of their international accounts. Perhaps Randstad Inhouse services can play an active role in this part, because here Randstad actively works with the client. If this is hard to realize, due to a customer satisfaction survey among the current international accounts the actual needs of these accounts can be analyzed. Besides, environmental factors and competitors’ offerings have to be analyzed. With the presented recommendations in mind, the whole IAM organization has to be screened actively. The most important thing is to settle an overall IAM employee profile, which has to be appropriate in the light of the strategic goals of the IAM department. With workshops, current employees have to be trained to actually fit within this profile. Then, appropriate personal goals and objectives have to be settled.
In the end, a big challenge for the IAM department is to make things understandable for everyone, throughout the whole Randstad organization, perhaps even for temporary employees. A roll out of this research can be seen as a good starting point in making things understandable.
Preface... 3
Management Summary... 4
1. Introduction and organization ... 10
1.1
Organizational structure and history ... 10
1.2
The International Account Management Department ... 11
1.3 Summary ... 13
2. Research Plan ... 14
2.1
Reason for Research... 14
2.2 Problem
definition... 15
2.2.1 Main
objective... 16
2.3 Methodological
accountability ... 17
2.4 Summary ... 19
3. Introduction in some key concepts ... 20
3.1
International account management... 20
3.2 Internal
Marketing... 22
3.3 Customer
Relationship
Management ... 23
3.4 (Customer-)
value... 24
3.5 Conclusion... 26
4. Theoretical frame ... 27
4.1 Introduction ... 27
4.2
Relationship management and internal marketing theories ... 27
4.3 Strategy
development ... 31
4.4 Summary ... 37
5. Evaluation of theories ... 38
5.1 Criteria... 38
5.2
Analysis of relationship management and internal marketing theories ... 38
5.3
Analysis of strategy development theories... 39
5.4
Use of theories in further research ... 41
5.5 Conclusions ... 42
6. Conceptual- and main theoretical model... 43
6.1
Explanation of conceptual model ... 44
6.2 Integration
of
concepts ... 44
6.3 Summary ... 45
7. Research Plan... 46
7.1
Short resume of research ... 46
7.2 Primary
data ... 46
7.3
Design of brown paper sessions ... 47
8. Main results and conclusions... 49
8.1
Criteria for judging brown paper session results... 49
8.2
Main conclusions from the brown paper sessions... 49
8.3 Summary ... 52
9. Recommendations... 53
9.1
Value and segmentation ... 53
9.2 Objectives... 58
9.2.1
Formulation of objectives... 60
9.3 Activities ... 61
9.4
Summary and integration of the recommendations... 64
9.6 Conclusion... 67
References ... 68
Appendixes ... 70
Appendix 1 ... 71
Appendix 2 ... 73
Appendix 2 ... 74
Appendix 3 ... 81
1. Introduction
and
organization
In this chapter a short overview of the organizational structure and history of Randstad Holding will be discussed. In connection with that an overview of the International Account Department will be presented, in which this research has taken place.
1.1 Organizational structure and history
Randstad Holding NV. is an international supplier of services to businesses and institutions. The company is active in Europe and North America. The Randstad Group is one of the largest temporary and contract staffing organizations in the world. The Randstad Group is organized along three segments:
1. mass-customized staffing (Randstad, Tempo-Team and other group companies), 2. professionals staffing, recruitment and selection (Yacht and other group companies) 3. in-house services (Capac & Inhouse Services).
Ad 1) This is Randstad’s regular business, namely: staffing, permanent placement and (high-volume) specialties. It is structured according to unique unit approach. Expert consultants in teams of two form the unit. They provide clients with temporary employees (the so called ‘flexworkers’) and permanent employees, making the match based on knowledge of both the client’s needs and the candidate’s skills, capabilities and requirements.
Ad 2) For middle and more senior management positions, Randstad recruit employees with professional qualifications, either for permanent positions or on secondment, interim or project basis with clients. This service includes a number of related recruitment and training programs that are often fee-based.
Ad 3) This is a very efficient total solution for managing a high-quality workforce with client-specific skill sets, aimed at improving labor flexibility, retention, productivity and efficiency. Randstad works on site exclusively for one client, providing a limited number of well-defined job profiles. These flexworkers are on the Randstad payroll. Randstad works with the client to determine specific performance criteria, and we provide total HR management, including recruitment & selection, training, planning, retention and management reporting.
Ad 4) Randstad offers a comprehensive range of HR project management, HR management and HR consultancy services that are based on extensive experience in this field. The range, from outplacement, career management and payroll management for small and medium enterprises to major HR process outsourcing services for large corporations, frees up time to allow their client HR managers to concentrate on essential strategic HR issues for their company. These services are usually offered separately from Randstad’s regular staffing and permanent placement offering, and are almost always fee-based
.
The Randstad Group is market leader in the Netherlands, Belgium, Germany, Poland and in the south-east of the United States. In addition to these markets, Randstad is also active in Canada, Denmark, France, Hungary, Italy, Luxembourg, Portugal, Spain, the United Kingdom, Sweden and Switzerland.
In 2004, the Randstad Group generated revenues of € 5.8 billion and a net income of € 199.6 million. During the reporting year, Randstad employed an average of 224,600 people every day. At year-end, Randstad had a total of 2,320 branches.
Corporate Mission
Randstad Group’s mission is to rank among the world leaders in matching demand and supply of labour and HR services.
Core Business
Randstad’s core business is well-timed matching of individual demand for challenging and well-paid work and the demand of companies and organizations for suitable and competent personnel. These targets are pursued in the following ways:
• by meeting local and regional employment requirements through tailored solutions according to the standards and values of all countries where the Group is active
• by deploying extensive knowledge of the employment market in combination with an unparalleled ability to attract, coach and retain talented people
• by committing to serve as a reliable partner for all stakeholders. Organizational Structure
The organizational structure of the Randstad Group is based on product-oriented divisions, which effectively match the needs of corporate customers and staffing employees (see figure 1.1).
Agency-based services and Specialized units Inhouse
services Top ProfessionalServices for Profiles
Randstad Holding
Randstad
Europe North AmericaRandstad
Figure 1.1 - Randstad Holding Organizational Structure (source: IAM RFI-document) 1.2 The International Account Management Department
Randstad Holding has earned a strong (pro) position to serve the international customers and therefore focuses on this market via the international accounts department. The Randstad department for international account management is the single point of contact for dealing with international requests for information and quotation. This department manages a customer database of approximately sixty accounts. The revenues at these accounts represent a market share of 2,7%. However, main competitors such as Adecco and Manpower are now perceived as real global players generating a significant higher market share within this international segment.
With clients being increasingly cost conscious and with the centralization of procurement of many services, it is crucial to offer cross-border service agreements, based on quality and cost efficiency. This international business is a strong growth sector in the global staffing market, valued at € 28 billion and representing approximately 20% of the total market. All Randstad Group countries work together on international account management. The international accounts already contribute significantly to total revenues.
The main objective for International Account Management at Randstad is to gain a fair market share. Therefore IAM will increase its revenues to a share of approximately 20% of total Group revenues, the actual share being 13,4%. Rationale behind this target is the IAM-outperformance of Randstad Group revenues at a minimum of 7,5% each year.
In a nutshell you can say that in a world of globalization, Randstad is positioning itself more and more as an international player with strong proven records as well as with new concepts. Randstad operates locally in order to serve its customers. This is done with a solid set of international best practices. These best practices favour a high added value. They combine customer intimacy with operational excellence. In this model International Account Management plays a key role. IAM offers the international customer base a strong proposition generated by cost savings and added value.
Organizational structure
The account management within the Randstad organization has been laid down in a formal concept description. On the next page the organizational chart for Randstad Account management is presented.
Figure 1.2 - Organizational chart Randstad account management Main objective and mission
The main objective for International Account Management at Randstad is to gain a fair market share. This can only be realised by increasing customer value. An increase in customer value will result in a higher account profit and revenue. The mission of IAM is to clearly contribute to Group objectives in general and to the growth of market share in particular. The activities of the IAM department support the basic Randstad strategy, which has four drivers:
• Growth of market share • New country development • Innovation and specialties • Profitability improvement.
International National
Regional Local
Office Manager •Regional Manager •BU Director
Member National Managing Team
Member Executive Board/ MD & Intl Accounts
Service Center National Account Management Service Center International Account Management
•International Account Directors •National Account Managers •Regional Account Managers •Dedicated Regional Managers •Dedicated Office Managers •Dedicated Units •Local Account consultants •Senior consultants Legend: Hierarchical line Functional line
1.3 Summary
In this chapter some useful background information about the organization has been presented. The organizational structure and some historical information about the Randstad Group have been discussed. Besides, a clear insight has been presented about the International Account Management Department. The next chapter will discuss the cause and background of this research.
2. Research Plan
“Research is a scientific activity dedicated to discovering what makes grass green” (Russell Baker)
This chapter first discusses the cause and background of the research. Based on this background the problem definition will be presented, including the sub questions. Finally this chapter will be concluded by the methodological accountability of this research project. 2.1 Reason for Research
Set up three years ago, the International Account Department and its approach is said to be up for the next level. This is because there are undesirable obstacles in the international battlefield:
• The lack of solution selling capabilities
• An insufficient natural drive to share knowledge and experience across the borders • Not having a strong and systematic managerial setting for international accounts The International Account Department is evaluated on the basis of the performance concerning revenues and profits of International Accounts. The main objective for this department is to gain a fair market share. Valued relationships, defined as relationships that are financially profitable in the long run, contribute to this objective. According to Lovelock (2002), valued relationships in business-to-business services are largely dependent on the quality of the interactions between individuals at each of the partnering firms. Increasing customer value will contribute to the extent of a valued relationship. Customer value is a concept that has a strong link with customer satisfaction and customer loyalty. Eventually, increases in customer value, and therefore customer satisfaction and customer loyalty, will result in a higher account profit and a growth in revenues. The department wants to improve the customer value of current international customers, rather than improve the value by attracting new international accounts.
However, customer value is not only created by the IAM department, but covers several departments of Randstad Holding. Nevertheless, the relationship and business management activities concerning the international accounts are a major and important part of the account management activities done by the IAM department. These activities therefore contribute to the creation of customer value. To underscore this statement from both the practical and theoritical side it is proved that effective account management also leads to higher customer satisfaction, more loyal customers and an increase in revenues.1 It is
however the question how effective account management at this moment is.
The IAM department has filled in some important elements, which contribute to the goal of creating and delivering superior customer value. These elements are part of a planning template, in literature mostly known as the ‘relationship management chain’. The IAM department have identified appropriate customer value segments (see appendix 1, account segmentation). The design of value delivery systems and the way the delivered satisfaction is managed is fair but still insufficient. For instance, there is no clear strategy in the use of marketing channels.
Undesirable obstacles
It becomes clear that the different elements and underlying processes are not integrated and coordinated in a structured manner. Besides, there is insufficient natural drive to share knowledge and experience across the borders and there is no strong and systematic
1
managerial setting for international accounts. Various account management processes, especially the internal marketing and relationship management processes, are nontransparent.
Nontransparency exists mainly because of the following two reasons. Firstly, as mentioned in the previous chapter, the international accounts are segmented into several industries. Each industry requires a different account management approach and therefore a specific industry related account manager or director managing each industrial segment. Because of this, there is hardly any exchange of knowledge and experience between the several industry related account managers about their account management activities. Moreover, these activities or processes are not being laid down in documents or databases. Sometimes they are at best reported in personal spreadsheets or other documents.
Secondly it appears that there is no clear strategy in how to serve the international accounts. Every employee services the international accounts in his or her own way.
Despite some clear formulations within the strategic plan of international account management, there are nevertheless several invisibilities. There is a strong belief that these invisibilities lead to losses of profit and revenues. IAM therefore wants to have a better and clear understanding of the activities that are being undertaken by IAM employees concerning the international accounts and of which improvements can be made in this field. As a result, here of strategical choices can be made in how to increase customer value through the IAM department.
It’s important to emphasize that the IAM department wants to take up a pro-active position in relation to the international accounts. This means that the department wants to control the situation by make things happen, rather then reacting to them. So the problems mentioned have to be seen in this perspective. Of course, to measure and interpret customer value, a customer satisfaction survey should be undertaken. The IAM department believes that also without such a survey some internal improvements will contribute to an increase in customer value.
2.2 Problem definition
The previous paragraph illustrated the reason for this research. In this paragraph, the problem definition will be presented. The problem definition consists of:
• a main objective
• a central research question • sub questions
• the boundary conditions of the research.
According to De Leeuw (2001) a problem definition has to comply with the claims of relevance, research ability and suitability.
According to Verschuren (1996) the starting point of the problem definition need to include the bottlenecks the researcher wants to solve. Then the researcher has to translate the bottlenecks into issues to work out which knowledge is necessary. The bottleneck is the information necessary to solve the main problem of the organization. Therefore two questions are important: “the why” and “the what” of the organization. The objective of the research answers “the why” question and the central research question gives answer to “the what” question. The main objective and main research question together form the problem definition.
2.2.1 Main objective
The objective has two functions. It mentions the bottleneck of the organization and it describes the knowledge that is necessary for the organization to solve the bottleneck. The last function describes “the why” of the research.
As described in paragraph 2.1 the bottleneck of the International Account Department of Randstad Holding is that some account management functions do not always work effectively and efficiently. Not having a strong managerial setting for the international accounts therefore leads to losses in profit and revenues.
The main objective must prove its relevance concerning the research. The objective needs to entail the following four elements (Kiewiet, 2005):
Knowledge: - About what - What for - For whom - In which form
The main objective implies the relevance of this research. The main objective of this thesis runs as follows:
Analyze the relationship management and internal marketing management processes of the International Account Management department and give recommendations on improving these functions to increase customer value of current international accounts.
Explanation of definitions
Account management: Account management is the philosophy and the set of instruments and techniques being used to maintain good relationships with (potential) major customers and to improve these relationships by directly influencing them in order to increase revenues and profit.
International account: account with branches in multiple countries in which a form of purchase coordination between these countries is aimed at.
International account manager: someone who is responsible for an international account across borders.
Customer Value: - Customer benefits – Cost of purchase2
- Market-perceived quality adjusted to the relative price of your product, where market-perceived quality is defined as ‘the customer’s opinion of your products or services compared to those of your competitors’.3
Internal marketing: concerned with the creation of an internal culture, climate and orientation, which assists and supports the organization in the achievement of its goals.
2
Best, 2000
3
Relationship management: concerned with the development of appropriate relationships with key customers and customer segments.
Main research question
The central question of this thesis runs as follows:
“How can the relationship management and internal marketing processes of the International Account Management department be improved in order to enhance and increase customer value of current international accounts?”
Sub questions
To come to a clear understanding of the main research question, several sub questions have been formulated. The sub questions form the structure of the research.
1. What exactly is customer value and why are relationship management and internal marketing the main processes of the IAM department that influence this value? 2. What are the current relationship management processes that are undertaken related
to international accounts?
3. What are the current internal marketing processes of the IAM department?
4. Which main factors have to be improved to increase customer value of current international accounts?
Preconditions4
In addition to the main objective, preconditions are given in relation to the outcomes of the research. The preconditions indicate the restrictions the research results and methods are liable to.
1. A precondition of this research is that it has to be completed within six months. 2. Naturally, the cost of this research needs to be limited to a minimum.
2.3 Methodological accountability Research typology
De Leeuw (2001) distinguishes five types of research. This research can be characterized as supporting policy, because it offers concrete and useful knowledge for business policy. Clear agreements have been made between the researcher and the client, in this case the International Account Management department. Concrete recommendations will be presented which makes it possible for IAM to steer account management processes in such a way that customer value of current international accounts will increase.
This also will be an explorative5 research, because it attempts to determine relationships and
discrepancies between different concepts. Besides, there are no concrete ideas about possible relationships or differences between these concepts in advance.
4
De Leeuw, 2001
5
Research method
According to Baarde & De Goede (2001) there are three methods of data collection for a research:
- Use of existing data
- Acquire data via observation
- Acquire data via written or verbal interviews
Observation as a data collection method will not be used in this research, as it is not about the determination of actual behavior. However, existent information (secondary data) will be used as a data collection method. Furthermore, oral interviews (primary data) will be taken in order to collect information about attitudes, opinions and knowledge of IAM employees. Other methods of data collection that will be used are brown paper sessions (discussed in chapter seven). This is a data collection method based on several scientific researches and by practical experience, whereby individuals work together to achieve a common goal. Delineation
1. This research relates only to the International Account Management department of Randstad Holding and has to be in line with the Strategic Plan of International Account Management, 2006-2008.
2. The focus within this research is on the relationship management and internal marketing processes of the IAM department, because these functions are most important to the enhancement and the increase of customer value of current international accounts. This will be further explained in the next chapter. In the figure below, the delineation of this research is presented.
Figure 2.1 - Research focus
This second delineation will be further outlined in the next chapter. Research approach
Starting point of this research was an internal analysis, which should give more insight into the main problem. By taking oral interviews more information about the main problem has been collected. After the internal analysis the main research plan has been written. In the next chapter a literature study will be presented, which will lead to the formulation of a conceptual framework. This framework will notify which methods will be used to answer the questions that have been formulated in this research plan.
Account Management
Sale
Relationship management Internal marketing
Project management Matrix management Acc.Man. as learning process Entrepreneurship
2.4 Summary
In this chapter the research plan has been presented. The next chapter gives an introduction to some key concepts that exist within this research. Therefore, this will answer the first subquestion. Then main theories will be outlined, coming from a literature study, that will be used to create a conceptual model. This model will be presented in chapter four and will be a guiding framework during the research project.
3.
Introduction in some key concepts
In this chapter some key concepts that occur in this research are discussed, based on background literature and internal documents. In the next chapter a theoretical frame will be presented from which the main problem will be further investigated.
In the first paragraph of this chapter, the functions and definitions of international account management will be discussed. Noting that international accounts are of strategic importance to Randstad, this implies that specific managerial activities have to be used to acquire, retain and develop these accounts. These activities are relationship management and internal marketing. These two concepts, which also form an important part of the main research question, will be described in detail in paragraphs 3.2 and 3.3. Because improvements in this field eventually have to lead to an increase in customer value, this concept must also be clearly described.
In this chapter answers will be obtained to the first sub question:
- What exactly is customer value and why are relationship management and internal marketing the main processes of the IAM department that influence this value?
3.1 International account management
There are a large number of definitions of account management, which often illuminate different aspects. However, Verra (1994) created a definition that comprises most important aspects. He gained the best input from Shapiro and Moriaty (1982). They state: ‘The general objective of national account management is to provide incremental profits from large or potentially large complex accounts by being preferred or sole supplier. To accomplish this goal, a supplier seeks to establish, over an extended period of time, an ‘institutional’ relationship, which cuts across multiple levels, functions and operating units in both the buying and selling organization. Ideally, this institutional relationship transcends and is stronger than any of the individual relationships between two companies.’
The definition of Verra has been presented in the definition list of the main research question. Account management according to Verra is the philosophy and the set of instruments and techniques being used to maintain good relationships with (potential) major customers and to improve these relationships by directly influencing them and by doing so to increase revenues and profit.
Moreover, account management is crucial in reaching corporate goals. Account management is about the contribution to corporate objectives by acquiring, developing, and retaining sustainable profitable relations with high value clients; next to growth of revenues, improvement of individual account profitability is targeted.
In several definitions the focus is on large accounts, which means that account management can only be found in business-to-business marketing. This is not really remarkable because these accounts are often responsible for a substantial part of a company’s total revenues, and that is why such an account deserves special attention. Due to a number of trends in business markets, among which globalization, ICT-developments and value chain management, a large number of companies is occupied with the implementation and development of (international-) account management. International account management becomes relevant when an organization grows beyond its native country and strives for a sense of purchase coordination.
According to Verra (1994) it is of importance that organizations do not just look into their own market but also focus on the internal organization, because this mainly the extent of success.
Account management consists of seven functions, which run as follows: - Sales - Relationship management - Project management - Matrix management - Internal marketing - Entrepreneurship
- Account management as a learning process
As mentioned before, in this research the emphasis will not be on all seven functions. Attention will only be paid to the relationship management and internal marketing functions, because these activities mainly contribute to the creation of customer value. Paragraphs 3.2 and 3.3 discuss the major importance of these functions in creating customer value. Before actual discuss these two functions, more insight is required into two concepts that often occur within account management. These two concepts are
• Account classification
• Decision Making Unit (DMU) Account classification
The basic assumption of account management is that different customers require a different approach. According to Verra (2001) especially size or turnover is hereby modifying. A widely used classification scheme is the ABC-classification. Although in this classification scheme c-accounts are most of the time one-man businesses the IAM account classification scheme is based on this theoretical framework. This scheme is comparable to the customer marketing method of Curry, which will be discussed in chapter four. This ABC-classification scheme refers to the IAM segmentation model. For segmentation criteria details, see appendix 1.
Figure 3.1 – Account classification scheme
As mentioned in the opening chapter, all international accounts benefit from the Randstad passion to serve and the focus on operational excellence. Because account management consists of a mix of activities, it operates in different degrees of complexity. Relating this to the classification scheme, it can be said that strategic International Accounts (A-Accounts) are those accounts of highest value requiring the most advanced degree of account management. Figure 3.2 on the next page shows the account management complexity and the related value of international accounts.
A-Accounts
(Strategic International Accounts)
B- Accounts
(Triple A – Accounts)
C- Accounts
(International Accounts)
Figure 3.2 – Account management complexity Decision Making Unit
Various people who influence purchase decisions to any extent form a decision-making unit (DMU). Because people of these teams have different backgrounds, influence and purchase motives, it is necessary for a supplier to map DMU’s properly (Biemans, 2001). For each account classification DMU structure differs. The larger the account, the more complex DMU structures of these accounts will be. This means that for the three different account types, three different forms of account management are needed.
3.2 Internal Marketing
According to Payne (2001) internal marketing is concerned with the creation of an internal culture and orientation, which support the organization in the achievement of its goals. In addition, internal marketing can be seen as an integrated approach to marketing and human resource management. A critical determinant of long term success in relationship marketing is the development and sustenance of a customer-oriented culture within the organization. To realize a decisive organization it is necessary to gain the full co-operation of all employees. Especially for service organizations like Randstad, internal marketing communication plays an important role in maintaining and nurturing a corporate culture founded on specific service values. According to Lovelock (2002), well-planned internal marketing efforts are especially necessary for organizations like Randstad, because Randstad is an organization that operates around a big part of the world.
Internal marketing is necessary to create team spirit and support of common corporate goals and to be kept informed of new policies and changes in service features. This is essential if not all employees are working at the head office, which is the case with the IAM department. The IAM department consists of three locations, namely Amsterdam, Eindhoven and Brussels. If internal communication processes run smoothly it will help ensure effective and satisfactory service delivery, achieve productive and harmonious working relationships, and create a sense of trust, respect and loyalty among IAM employees.
According to Piercy and Morgan (1991), internal marketing is the internal sale of a product marketing plan and other things like good communication. Alsem (2001) states that a customer focus can only be realized if everyone within an organization feels connected with the customer. (50) (60) (15) (5-10) intl targets in progress intl accounts Triple-A intl accounts strategic intl accounts va lu e
account management complexity
+ +++
+++
sales
Therefore, he argues that two elements of human factors are crucial:
- 1) Motivation, necessary for a good implementation of processes and strategies
-2) Learning and renewal, needful to gather impulses from the whole organization to foresee in a higher level of customer value
3.3 Customer Relationship Management
Relationship management is about the management of relationships between an organization and its stakeholders in the areas of strategy, marketing and international business, from both an economic and managerial perspective. However, relationship management is now widely known and defined as ‘customer relationship management’ (CRM). CRM is such a broad concept that it is difficult to find an unequivocal definition. However, two definitions will be presented. The first one is from the dutch professor Hoekstra (2003):
“CRM is een wijze van ondernemen die het vervullen van individuele klantwensen centraal stelt, consequenties heeft voor alle bedrijfsfuncties, en wordt vertaald in activiteiten en bedrijfsprocessen die zijn gericht op het creëren van relaties met individuele afnemers, waarbij wordt gestreefd naar het bieden van maatwerk.”6
The second definition from Payne and Frow is comprehensive, because it covers a lot of essential elements found in various definitions about CRM. After a extensive research, they created their own CRM definition:
“ CRM is a strategic approach that is concerned with creating improved shareholder value through the development of appropriate relationships with key customers and customer segments. CRM unites the potential of relationship marketing strategies and IT to create profitable, long-term relationships with customers and other key stakeholders. CRM provides enhanced opportunities to use data and information to both understand customers and co-create value with them. This requires a cross-functional integration of processes, people, operations, and marketing capabilities that is enabled through information, technology, and applications.7”
Customer Relationship Management is based on three aspects of marketing8, which join CRM
due to developments in Information and Communication Technology. The aspects mentioned are:
1. Customer orientation 2. Relationship marketing 3. Database marketing
Customer orientation is the focus on meeting the needs of one's customers, internal or external. This service establishes specific customer satisfaction standards and actively monitors client satisfaction.9
Relationship marketing or direct marketing implies obtaining and maintaining a structural, durable and direct customer relationship.10 Because the emphasis is on a direct one-to-one
marketing relationship, the application of databases is necessary to obtain customer information. Therefore direct marketing is sometimes called database marketing.
6
Hoekstra, 2003
7
Payne & Frow, 2005
8
Verhoef & Langerak, 2002
9
MIT Information Services and Technology,
10
When talking about CRM, it is important to know what the aim of CRM actually is. In contrast to the various definitions of CRM, some literature research demonstrates that defining the aim is much more unanimous. However, the long and the short of it is the maximization of customer loyalty resulting in the maximization of customer profit through maximization of the customer lifetime value.
3.4 (Customer-) value
Value is a concept that is mentioned and described most in marketing literature. More than that, value is a concept that is said to be part of the fundamental role of marketing; many theorists argue that it is to create customer value (Lovelock, 2002). Gale defines customer value as ‘market perceived quality adjusted for the relative price of your product’, where market perceived quality is defined as ‘the customer’s opinion of your products or services compared to those of your competitors’. 11 A similarity between all these descriptions of value
is that value is personal and may vary widely from one customer to another. These variations often form the basis of segmentation, a concept that will be discussed in the next chapter.
However, Lanning argues that the term value can be used widely, and is liable to different interpretations. For example, the idea of creating value for shareholders is different from the creation of value for customers. Also Alsem (2001) makes distinctions, for instance between customer value and customer lifetime value. He argues that customer value is related to desirable characteristics and objectives of customers. Customer lifetime value is concerned with the financial value of a customer for an organization. But the distinction between these concepts is not always strictly made in literature.
It is conspicuous that most of the definitions about (customer-) value are not argued from customers’ perspective. In other words, it can be emphasized that the perspective is often linked to an active supplier, creating value, and a passive customer, consuming/using that value. So the question rises what value is from customers’ perspective.12 According to
Christopher e.a. it is about ‘the relationship between the customer’s perception of the benefits they believe they will derive from a purchase compared to the price they will have to pay.’ This description is closely linked to the definition Payne presents from a customer perspective, namely “the perceived benefits that customers believe they receive from ownership or consumption of a product or service.” This definition is tightly related to the model Mandour (2005) presents (see figure 3.3), which shows the elements of which customer value exist.
Figure 3.3 - The customer value map
11 Gale, 1994 12 Pardo et.al, 2005
Product attributes Service attributes Transactions cost Life cycle cost
Risk
Perceived benefits
As mentioned in the previous paragraph, relationship management is one of the possibilities to create customer value, such as Alsem states. But striking is that Cristopher states that customer value is a highly significant component of relationship marketing. He mentions, “relationships are built on the creation and delivery of superior customer value on a sustained basis.”
Biemans describes how value can be created for customers, but this is not represented in a clear model. That is the reason why from own perspective a model has been draw up that reflects all elements that contribute to value creation. This is presented in the figure below.
Figure 3.4 - Value creation model - (diverted from Biemans, but created from own perspective)
Much of the elements are defined and operationalised in the next chapter. For now, the overall value-creation process can be considered in terms of three key elements:
• Value customer receives; determining what value the company can provide to its customers
• Value organization receives; determining the value the organization receives from its customers
• Managing this value exchange; maximizing the lifetime value of desirable customer segments.13
As can be seen, there are a lot of interesting definitions and views of the (customer-) value concept. Therefore it is hard to indicate which is the best definition.
13 Cristopher et al, 2002 Value Creation Value strategies Market orientation 1. Product Leadership 2. Customer Intimacy 3. Operational Excellence External:
Focus on relevant market parties
1. Accounts /
Customers
2. Competitiors
3. Suppliers
4. Other market parties
Internal:
Focus on interfunctional coordination.
Esteemed value elements by customers:
Characteristics of
product / service Characteristics of contact
personal
2 Characteristics of
supplier Value Creation Proces
1 Defining value
2 Developing value
3 Delivering value
3.5 Conclusion
From a literature study in this chapter some main concepts of this research have been outlined and in this way the first sub question has been answered. In the theoretical frame theories will be discussed from which the main problem will be further investigated. On the basis of the conceptual model, the theories, which will be used in further research, will be presented.
4. Theoretical
frame
“Very dangerous things, theories” (Dorothy L. Sayers)
In this chapter theories will be presented from which the problems discussed in chapter two eventually will be deepened out. However, no judgments are made about these theories. On the basis of several criteria, these theories will be evaluated in the next chapter. From these evaluations, it will be determined which theories will be used in further research. Besides the conceptual model will be presented, which will be used as a steppingstone in this research. 4.1 Introduction
Out of the research plan and described issues, two questions have been formulated which should form the base of this theoretical frame:
1. Which literature studies about relationship management and internal marketing perspective deal with the creation, enhancement and increase of customer value?
2. Which literature studies discuss strategy development?
As can be noticed, the first question is related to the concepts of relationship management and internal marketing, because these are two important elements of the main research question, which in the end need to be answered. Initially, the connection between the first and second question is not clear. However, if an organization wants to build customer relationships and to increase customer value, it is not just about how this can be created and increased. Important is also which value an organization wants to add to their customers. What is the mission of an organization and where does or does it not invests in? Strategy development theories and models can give answers to these questions. Out of the current situation and on the basis of strategy it will be determined what an organization wants and can achieve. The essence of an organization is the harmonization between what they want and what they are able to.
In paragraphs 4.2 and 4.3 theories are discussed which relate to the two questions that have been formulated for this theoretical frame.
4.2 Relationship management and internal marketing theories
In this paragraph theories are described concerning the creation and increase of customer value. These theories are:
• Value Chain - Porter, 198514
• The Relationship Chain - Payne e.a., 1995 • The Customer Marketing Method - Curry, 1998 Value Chain - Porter
This theory answers questions like:
- How can an organization increase customer value?
- Which activities and processes are part of an organization and how do they relate to each other?
Porter has developed a model that describes various activities an organization performs, and links these activities to the organization’s competitive position. Except for the identification of competitive pro’s and cons, this model is also appropriate to find manners how to increase customer value.
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According to Porter, this surplus of value will be obtained if an organization: - Causes a reduction in costs
- Distinguishes their offers
- Acts faster on customers’ needs
The value chain divides an organization into nine value-generating activities, which are subdivided in primary and secondary activities. Primary activities are directly concerned with the creation or delivery of a product or service. These primary activities are linked to support activities that help to improve their effectiveness or efficiency.
These secondary or support activities are: procurement, technology development (including R&D), human resource management, and infrastructure. Each organization is able to divide value-generating activities further, in order to gather more insight. The figure below presents the value chain model.
Figure 4.1 - Value Chain – Porter (1985)
The linkages between activities are crucial for corporate success. The linkages are flows of goods and services, information, as well as systems and processes for adjusting activities. To use this model in practice, an organization has to pass through four steps15:
- Analysis of own value chain – which costs are related to every single activity
- Analysis of customers’ value chains – how does our product fit into their value chain - Identification of potential cost advantages in comparison with competitors
- Identification of potential value added for the customer – how can our product add value to the customers value chain (e.g. lower costs or higher performance) – where does the customer see such potential
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Relationship chain - Payne
The relationship management model of Payne can be seen as an extension or a continuation of Porter’s value chain. Payne considers marketing as a ‘business-wide’ process with the goal to create superior customer value. If an organization is able to deliver this value consequently, a durable relationship with the customer will be created. Like Porter, Payne states that the creation of customer value can be achieved due to an integration of various organizational activities.
The sequence in which these activities can be executed is not fixed. An organization should frequently determine to which set of activities they pay attention. To compose an effective relationship management chain, an organization has to focus on four main issues:
1. Defining the value proposition. This is about the clear definition and specification of the precise nature of the value to be delivered, market segment by market segment – or even customer by customer
2. Identifying appropriate customer value segments. Segment of markets on the basis of groupings of customers sharing common value preferences.
3. Designing value delivery systems. This is about marketing channels employed, physical distribution, flexibility of response and information systems.
4. Managing and maintaining delivered satisfaction. This is concerned with monitoring and controlling processes that deliver satisfaction and the customers’ perceptions of performance.
These four issues are clearly represented in the ‘relationship management’ figure below.
As comes forward out of the figure is that the managing of internal and external markets runs simultaneously with the four activities of the relationship management chain. This has to occur on an integrative base and must not be managed as independent activities. The way in which an organization is able to coordinate these activities will eventually determine the success of a relationship management strategy.
Figure 4.2 - The relationship management chain - Payne (2002)
MANAGING INTERNAL MARKETS
- Marketing planning – internal
- Culture, climate and employee retention
Define the value proposition - Understand the customer value chain - Where and how do we intend to create value - Competitive benchmarking Segmentation, targeting and positioning - Identify customer value preferences - Segment profitability analysis - Configure the package
Operations and delivery systems - Mass customisation - Partnering (value- added partnerships) - Process re-engineering Measurement and feedback - Service process monitoring - Customer satisfaction studies - Employee satisfaction studies
MANAGING EXTERNAL MARKETS
- Marketing Planning – external
Customer marketing method - Curry
Customer marketing is “a business method which uses process control techniques to measure, manage and improve customer performance and customer focus”.16 The customer
performance factors are: customer profitability, customer behaviour and customer satisfaction. The customer focus factors are: Organization, communications and information. There is a correlation between these factors. If all things are equal, this means that if an organization can improve customer focus it will be able to improve customer performance. This is represented in figure 4.3.
Figure 4.3 – Customer focus and customer performance
The model represents the idea that if the internal Customer Focus is strong, customers of an organization will be very satisfied. And if customers are very satisfied, their behaviour will be nice, which will result in giving an organization a large part of their business. This positive customer behaviour will lead to higher customer value and therefore a higher operational profit.
The Customer Marketing Pyramid displays for all hands exactly how many or what kinds of customers an organization has and how many of which kind an organization wants to have in the future. Curry explains how CRM can help organizations create profits by implementing a customer-focused strategy. Curry introduces a customer pyramid, which is segmented as Top, Big, Medium and Small. The Customer Marketing method tries to optimise marketing effort. The well-known rule of the thumb that 20% of the customers provide for 80% of the turnover is extended to a further subdivision of 20, 5 and 1% in a customer pyramid. By concentrating marketing effort on the Top, Big Medium and Small clients a better return on investment is obtained. This segmentation helps to visualize, analyze, and improve customer profitability.
16
Customers are being segmented on the basis of revenue contribution. The higher the revenue contribution from certain customers, the higher these customers are in the customer value pyramid. The figure below shows the customer value pyramid17.
Figure 4.3 – The customer value pyramid – Curry (1998)
Organizations will have success if they are able to follow this three-step Customer Marketing Strategy:
1. Get new customers into your pyramid 2. Move customers higher into your pyramid 3. Keep the customers in the pyramid.
Curry states that the customer marketing method is a manner to implement CRM in an organization.
4.3 Strategy development
As mentioned before, out of the current situation and on the basis of strategy it will be determined what an organization wants and can achieve. The essence of an organization is the harmonization between what they want and what they are able to. Out of several theories this paragraph will discuss this topic. These theories can be divided into two areas: market strategies and marketing policies. Theories about market strategies are used as an introduction to the marketing policies theories.
Theories relating to market strategies:
• Three generic strategies - Porter, 1980
• The value disciplines model - Treacy and Wiersema, 1993 Theories relating to marketing policies:
• The CRM Skillsmodel - Yousri Mandour, 2005
• Strategically Embedding Customer Relationship Management in Organizations - Verhoef and Langerak, 2002
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