A Strategic Framework for Customer Relationship Management
A Strategic Framework for Customer Relationship Management Introduction: This article explores the plethora of literature available on CRM and relationship marketing and emphasizes the need for a single, process-based framework that helps in making a comprehensive CRM strategy followed by its successful implementation. The objective is to highlight CRM’s role in enhancing customer value and, in turn the shareholder value.
Various CRM and marketing experts, who provide their views in the article, emphasize the need for a cross-functional, process-oriented approach which identifies three alternative perspectives of CRM within a holistic organizational context. They try to identify five key cross-functional CRM processes starting from a strategy development process, followed by value creation process, multichannel integration process, an information management process, and in the end performance assessment process.
Based on these 5 pillars, they put forward a new conceptual framework specifying the roles and functions associated with each element in the framework. Summary: 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. There is a need to develop relationship marketing strategies and IT architecture to create profitable, long-term relationships with customers and other key stakeholders.
The article is organized mainly in three parts. Firstly, it explores the three alternative perspectives of CRM. Secondly, it considers the need for a cross-functional process-based approach to CRM where the strategists develop criteria for process selection and identify the five key CRM processes. Next, they propose a strategic conceptual framework that is constructed of these five processes followed by the examination of the components of each process. Hence, CRM can be defined with three perspectives forming a continuum.
At one corner is the narrowly and tactically defined particular technology solution, followed by wide-ranging technology (customer oriented IT and Internet), and customer centric approach (holistic approach emphasizing creation of shareholder value) as we move towards right at the other end of the continuum. Processes are the backbone of any initiative or a framework. Absence of a strategic framework for CRM is one reason for the disappointing results associated with many CRM initiatives.
The strategic perspective starts with reviewing the following four process selection criteria for marketing and business processes which are now augmented by 2 new additional suggestions. 1)The processes should comprise a small set that addresses tasks critical to the achievement of an organization’s goals. 2)Each process should contribute to the value creation process. 3) Each process should be at a strategic or macro level. 4)The processes need to manifest clear interrelationships. 5) New: Each process should be cross functional in nature. 6)New.
Each process would be considered by experienced practitioners as being both logical. The refining of CRM strategy can start with the interaction research as interaction and communication play a crucial role in the various stages of research. It consists of interaction with various executives, meetings and group discussion with emphasis on testing concepts, new ideas, and results. On the other hand, the process identification and CRM framework creation begins with identification of generic CRM processes which are used by an expert panel of experienced CRM executives.
The resultant five generic processes are: the strategy development process, the value creation process, the multichannel integration process, the information management process, and finally the performance assessment process. These five key generic CRM processes help form a preliminary conceptual framework which is continuously improved for better business results and increased share value. Next are the business/customer strategy and the value creation processes.
The business strategy process can commence with a review of a company’s vision and its relation to the CRM model. It is followed by the review of the industrial and competitive environment. Here the traditional industry analysis is augmented by more contemporary approaches for deeper environmental analysis and the understanding the impact of disruptive technologies. Customer strategy on the other hand, deals with CRM perspective which requires a cross functional approach, especially when different departments are involved in strategy development.
Other important facets are information management process and performance assessment. Information management is concerned with the collection, integration and use of customer data and information from all processes. It involves managing assets like the data repository, IT systems and analysis tools. Data repository provides a corporate memory of all customers. Systems include the organization’s computer hardware, software, middleware IT, front office and back office applications like SFA and call center management.
Lastly, analysis tools support many activities involved in interfacing directly with customers with technologies like data mining. The article also talks about Multichannel Integration process, which takes into account the combinations of different channels with customer interaction perspective. It takes the outputs of the business strategy and value creation processes and translates them into value-adding activities with customers. It ensures that the customer experiences remains highly positive within those channels. Analysis:
Even though, there has been enough emphasis on the cross-functional, process-based CRM strategy framework that aims to help companies, it is mostly based on large industrial companies and not the small and medium sized companies. I agree with the views that the size and complexity of such enterprises are most likely to post big CRM challenges, but small scale initiatives should be considered as well. I concur with objective of the article which deals with a process-based conceptual framework and cross functional approach for strategic CRM model.
Also, I agree with argument which has been put forward again and again in the article for the need of an acceptable definition that encompasses all facets. The framework proposed in the article is just a beginner’s model, yet a potentially useful starting point for the development of improved insight into these aspects of CRM theory. But according to me, because of the changing scenarios and fickle nature of market there is still a need for delimiting the domain, agreeing on a definition for CRM, and building a research agenda. I would like to add that certainly there is a need for measure and control the CRM performance.
But, at the same time traditional approach for performance measurement systems will not be suitable for cross functional CRM. There have been new initiatives like balanced scorecard which enables a wide range of metrics designs. It consists of shareholder results and performance monitoring. Ideally, it should reflect the performance standards necessary across the five major processes to ensure that CRM activities are planned and practiced effectively and that a feedback loop exists to maximize performance improvement and organizational learning.
The article also explores the multiple channels, such as field sales forces, Internet, direct mail, telephony, traditional television, e-commerce and m-commerce, including e-mail to interact with its customers. For example, making use of e-commerce opportunities and the fundamental economic characteristics of the Internet can enable a much deeper level of segmentation granularity than is affordable in most other channels. With the advent of Internet, interactive digital television, mobile telephony and text messaging, wireless application protocol, and 3G mobile services can be utilized in this field.
The challenge lies in the ability of strategy to uphold the same high standards across different channels enhancing customer experiences. As far as associated value goes, I believe that outputs of the strategy development process leads to programs that both extract and deliver value and maximizes the lifetime value of desirable customer segments. It includes determining what value the company can provide to its customer along with what value the company can receives from its customers.
These value propositions include the relationship among the performance of the product, the fulfillment of the customer’s needs, and the total cost to the customer over the customer relationship life cycle. Like any other initiative, measurement is an integral part through the use of the metrics. The performance assessment sees that the organization’s strategic aims in terms of CRM are in alignment with the acceptable standard and that a basis for future improvement is established. Conclusion:
Often, the organizations are plagued by the lack of a widely accepted and appropriate definition of CRM along with the failure to recognize its constitution. This can lead to the failure of a CRM project as this way the organization views CRM from a limited technology perspective or undertakes CRM on a fragmented basis. The plethora of information requires a cross-functional integration of processes, people, operations, and marketing capabilities that is enabled through information, technology and applications.
The options provided in the article explore the opportunities like cross-selling and up-selling to acquire or strengthen customer database. To ensure that technology solutions support CRM, it is important to conduct IT planning from the perspective of providing a seamless customer service rather than planning for functional or product-centered departments and activities. On the organization’s front, the focus is on increasing customer lifetime value by determining the variation in potential customer profitability across different customer segments along with the prepositions like customer acquisition and customer retention.