A Strategic Framework for Customer Relationship

8/19/2019 A Strategic Framework for Customer Relationship

1/11

A Strategic Framework for Customer Relationship ManagementAuthor(s): Adrian Payne and Pennie FrowSource: Journal of Marketing, Vol. 69, No. 4 (Oct., 2005), pp. 167-176Published by: American Marketing AssociationStable URL: http://www.jstor.org/stable/30166559 .

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2/11

Adrian

Payne

& Pennie

Frow

A

Strategic

ramework

or ustomer

Relationship

anagement

In

this

article,

he

authors

develop

a

conceptual

framework or

ustomer

relationship

management

CRM)

that

helps broadenthe understandingf CRM and its role inenhancingcustomervalue and, as a result, hareholder

value. The

authors

explore

definitional

spects

of

CRM,

and

they dentify

hree alternative

erspectives

of CRM.

The authors

mphasize

the need for

cross-functional,

rocess-oriented pproach

that

positions

CRM

at a

strate-

gic

level.

They

identify

ive

key

cross-functional RM

processes:

a

strategy

evelopment

rocess,

a

value

creation

process,

a

multichannel

ntegration

rocess,

an

information

anagement

process,

and a

performance

ssessment

process. They develop

a new

conceptual

framework ased on these

processes

and

explore

the role

and function

of

each element

n

the framework.

he

synthesis

of

the diverse

concepts

within

he literature n

CRM

and rela-

tionship

marketing

nto

single,process-based

framework

hould

provide

deeper

insight

nto

chieving

uccess

with

CRM

strategy

nd

implementation.

ver the

past

decade,

here as

been

an

explosion

f

interest n customer

relationshipmanagement

(CRM)

by

both academics nd executives. ow-

ever,

despite

n

increasing

mount f

published

material,

most f which s

practitioner

riented,

here emains

lack

of

agreement

boutwhat

CRM is and

how

CRM

strategy

shouldbe

developed.

The

purpose

of

this

article

s

to

develop process-oriented

onceptual

rameworkhat

osi-

tions

CRM

at a

strategic

evel

by

dentifying

he

key

ross-

functional

rocesses

nvolved n the

development

f

CRM

strategy.

ore

pecifically,

he

ims

of

this rticle re

.To

dentify

lternative

erspectives

f

CRM,

.To

emphasize

he

mportance

f

strategic

pproach

oCRM

within

holistic

rganizational

ontext,

.Toproposeive ey enericross-functionalrocesseshat

organizations

an use

to

develop

nd deliver n

effective

CRM

trategy,

nd

.To

develop process-based

onceptual

rameworkor

RM

strategyevelopment

nd oreview

he

ole nd

omponents

of ach

rocess.

We

organize

his

rticle

n

three

main

parts.

irst,

we

explore

herole

of

CRM and

dentify

hree lternative

er-

spectives

f

CRM.

Second,

we

consider

he need

for

a

cross-functional

rocess-based

pproach

to CRM. We

develop

riteria or

process

election

nd

dentify

ive

key

CRM

processes.

hird,

we

propose

strategic

onceptual

framework

hat

s

constructedf these

five

processes

nd

examine he omponentsfeachprocess.

The

development

f this

framework

s a

response

o a

challenge y

Reinartz, rafft,

nd

Hoyer

2004),

who criti-

Adrian

ayne

s

Professorf ervices

nd

Relationship

arketing

nd

Directorf he

entre

or RM

e-mail:

[email protected]),

nd

Pennierow

s

Visiting

ellow

n

Marketing

e-mail:

[email protected].

uk),

ranfield

chool

f

Management,

ranfield

niversity.

he

uthors

acknowledge

he

inancial

upport

fBT

plc

nd

AS

with

his

esearch,

and

hey

hank

hehree

nonymous

M

eviewers

nd he

onsulting

di-

tors orheir

elpful

omments

n

previous

ersionsf his

rticle.

cize

the evere ack of

CRM

research

hat akes

broader,

more

trategic

ocus.The article

oes

not

explorepeopleissues related oCRM

implementation.

ustomer elation-

ship management

an fail when a

limited number

of

employees

re

committed

o

the

nitiative;

hus,

mployee

engagement

nd

change

management

re essentialssues

n

CRM

implementation.

n

our

discussion,

we

emphasize

such

mplementation

nd

people

ssues

s a

priority

reafor

furtheresearch.

CRM

Perspectives

and Definition

The term

customer

elationship

anagement merged

n

the

information

echnology

IT)

vendor

ommunity

nd

practitionerommunity

n the

mid-1990s.

t s often

sed

to

describe

echnology-based

ustomer

olutions,

uch s sales

force

utomation

SFA).

In

the

academic

ommunity,

he

terms

relationship arketing

nd

CRM are often sed

interchangeably

Parvatiyar

nd Sheth

2001).

However,

CRM is

more

ommonly

sed n the

ontext f

technology

solutions ndhas

been described s

information-enabled

relationshipmarketing

Ryals

and

Payne

2001,

p.

3).

Zablah,

Beuenger,

nd

Johnston

2003,

p.

116)

suggest

hat

CRM

is a

philosophically-related

ffspring

o

relationship

marketing

hich s

for hemost

art eglected

n

the itera-

ture,

nd

they

onclude

hat further

xploration

f

CRM

and its

related

henomena

s

not

only

warrantedut also

desperately

eeded.

A

significant

roblem

hat

many

rganizations

eciding

to

adopt

CRM

face

stems rom he

great

eal of

confusion

about

what

onstitutes

RM.

In

nterviews ith

xecutives,

which ormed

art

four

research

rocess

we

describe his

process

subsequently),

e

found

wide

range

of

views

aboutwhat

CRM means.

To

some,

t

meant

irect

mail,

loyalty

ard

scheme,

r a

database,

whereas thers

nvi-

sioned t

as

a

help

desk or

a call

center.

ome

said that t

was

about

opulating

data

warehouse r

undertaking

ata

mining;

thers

onsidered

RM an

e-commerce

olution,

such as theuse of

a

personalization

ngine

n

the nternet

(c) 005,American arketingssociation JournalfMarketing

ISSN:

022-2429

print),

547-7185

electronic)

167

Vol.

9

October

005),

67-176

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3/11

or a relational

atabasefor SFA. This

lack of a

widely

accepted

nd

appropriate

efinitionfCRM can contribute

to thefailure f a CRM

project

when n

organization

iews

CRM

from limited

echnologyerspective

r undertakes

CRM

on a

fragmented

asis.

The

definitionsnd

descriptions

f

CRM

that ifferent

authors

nd authoritiesse

vary onsiderably,

ignifying

variety

f

CRM

viewpoints.

o

identify

lternative

erspec-

tives f

CRM,

we

considered efinitionsnd

descriptions

f

CRM

from

range

f

sources,

whichwe summarize

n the

Appendix.

We excluded

ther,

imilar efinitionsrom his

list.

An

important

spect

of the CRM definition

hatwe

wanted

o examinewas its

associationwith

technology.

This s

important

ecause CRM

technology

s often ncor-

rectly quated

with CRM

(Reinartz,

Krafft,

nd

Hoyer

2004),

and a

key

reason orCRM

failures

viewing

RM

as a

technology

nitiative

Kale 2004).

For this

eason,

we

reviewhedefinitions

n

the

Appendix

ith

pecial

ttention

to their

mphasis

n

technology.

his review

uggests

hat

CRM can be defined

rom t leastthree

erspectives:

ar-

rowly

nd

tactically

s a

particularechnology

olution,

wide-rangingechnology;

nd customerentric. hese

per-

spectives

an be

portrayed

s

a continuum

see

Figure

).

One

organization

e

interviewed,

hich

spent

more

than

30

million n

IT

solutions

nd

systemsntegration,

described RM

solely

n

terms

f ts

SFA

project.

t

this

extreme,

RM

is defined

arrowly

nd

tactically

s a

par-

ticular

echnology

olution

e.g.,

Khanna

2001).

We call

thisCRM

Perspective

. Other

efinitions,

uch s that f

Kutner

nd

Cripps

1997),

though

omewhat

roader,

lso

fall nto

his

ategory.

In

another

rganization

hatwe

interviewed,

he term

CRM

was used

to refer o a wide

range

of customer-

oriented T and Internet

olutions,

eflecting

tone

and

Woodcock's2001)

definition.

his

represented

RM

Per-

spective

,

a

point

ear

hemiddle f the ontinuum.

Perspective

reflects

more

strategic

nd

holistic

approach

o CRM that

mphasizes

he selective

manage-

ment f

customer

elationships

o create hareholderalue.

This reflects lements

f several

previously

oteddefini-

tionsof

CRM,

including

hose

of Buttle

2001),

Glazer

(1997),

Singh

nd

Agrawal

2003),

and Swift

2000).

Fol-

lowing

this

phase

of our

work,

we identified

ablah,

Beuenger,

nd

Johnston's

2003)

research,

hich

upported

ourviewof these

erspectives.

The

importance

f how CRM is defineds

not

merely

semantic.

ts definition

ignificantly

ffects

he

way

an

entire

rganization

ccepts

and

practices

CRM. From a

strategiciewpoint,

RM

is not

imply

n IT solution hat

is used to

acquire

nd

grow

customer

ase;

it

nvolves

profoundynthesisf strategicision; corporatender-

standing

f thenature f customer alue

n a multichannel

environment;

heutilizationf

the

ppropriate

nformation

management

nd CRM

applications;

nd

high-qualityper-

ations, ulfillment,

nd service.

Thus,

we

propose

hat

n

any organization,

RM

shouldbe

positioned

n

thebroad

strategic

ontext

f

Perspective

.

Swift

2000)

argues,

nd we

concur,

hat

rganizations

willbenefit

rom

dopting

relevant

trategic

RM

defini-

tion or heir

irmnd

nsuring

ts onsistentse

throughout

their

rganization.

hus,

we

developed

definitionf

CRM

that eflected

erspective

.

We examined heCRM litera-

ture,

ynthesizedspects

of the

variousdefinitionsnto a

draftefinition,ndthen estedtwith racticing anagers.

As ourresearch

rogressed,

e went

hrough

everal tera-

tions.The result s

the

following

efinition,

hichwe use

for

he

purposes

fthis

tudy:

CRM s a

strategic

pproach

hats concernedith reat-

ing mproved

hareholderalue

hrough

he

evelopment

of

ppropriate

elationships

ith

ey

ustomersnd us-

tomer

egments.

RMuniteshe

otential

f

relationship

marketing

trategies

nd

T to reate

rofitable,ong-term

relationships

ith ustomersnd ther

ey

takeholders.

CRM

provides

nhanced

pportunities

o use data nd

information

o both nderstandustomers

nd cocreate

valuewith hem. his

equires

cross-functional

ntegra-

tion f

processes,eople,

perations,

nd

marketing

apa-

bilitieshat s enabledhroughnformation,echnology,

and

pplications.

This definition

rovided

guidance

for our

subsequent

research

considerations nd the

strategic

nd cross-

functional

mphasis

of

the

conceptual

framework e

developed.

FIGURE

1

The CRM Continuum

CRM

Defined

Narrowly

and Tactically

CRM

Defined

Broadly

and

Strategically

CRM

is about the

implementation

f a

specific echnology

solution

roject.

CRM is the

implementation

f an

integrated

eries of

customer-oriented

technology

olutions.

CRM

is a holistic

approach

to

managing

customer

relationships

to

create shareholder

value.

168/Journalf

Marketing,

ctober 005




4/11

Processes:

A

Strategic erspective

Gartner

2001)

calls for

fresh

pproach

o business

ro-

cesses n CRM that nvolves oth

ethinking

ow hese

ro-

cesses

appear

o the ustomernd

reengineering

hemo be

more ustomer

entric. ale

(2004)

supports

hisview and

argues

hat critical

spect

f

CRM involves

dentifying

ll

strategic rocesses

hat ake

place

between

n

enterprise

and

ts customers. o

address his

hallenge

f

adopting

fresh

pproach

o

CRM

processes,

e aimed

o

dentify

he

keygeneric rocesses elevanto CRM.

We

examined he

iterature

o

dentifyppropriate

rite-

riafor

process

election

utfound ittlework n this

rea,

with he

xception

f the

ontribution

y

Srivastava,

her-

vani,

nd

Fahey

1999),

who stablish

our

rocess

election

criteriaor

marketing

ndbusiness

rocesses.

We

chose heir

work s a

starting oint

forthe

dentificationf

process

selectionriteriaor

CRM. The

criteria hese uthors

ro-

pose

are as

follows:

irst,

he

processes

hould

omprise

small etthat

ddresses asks

ritical

o

the chievementf

an

organization's

oals.

Second,

ach

process

hould on-

tribute o

the value creation

rocess.

Third,

ach

process

should

e at a

strategic

r

macro

evel.

Fourth,

he

rocesses

need omanifestlear nterrelationships.

As

part

f our

research,

e

conducted

workshop

ith

a

panel

of

34

highly xperienced

RM

practitioners,

ll of

whomhad

extensive

xperience

n the

CRM and T

sectors.

The

directorf

leading

esearch

nd

management

nstitute

specializing

n the

CRM and T

sectors

elected he

panel.

Participants

ere

selectedon

the basis of

the

following

attributes

o

ensure hat

hey

were

knowledgeable

bout

CRM,

its

implementation,

nd

its

operation:

ubstantial

management

nd

industrial

xperience

average

of 17.2

years),

maturity

average ge

of

40.2

years),

nternational

representation

nd

nternational

xperience

managers

rom

nine

countries

ttended;

most of them

had

international

experience),ndacademic ualificationsdegree requiva-

lent).

n

the

irst

art

fthe

workshop,

hich

nvolved

mall

group

essions,

he

panel

reviewed nd

subsequently

nani-

mously

greed

hat

hese our

riteria ere

ully

ppropriate

for

electing

RM

processes.

However,

hey

lso

proposed

two further

riteria:

irst,

ach

process

houldbe

cross-

functionaln

nature,

nd

second,

ach

process

would

be

considered

y

experiencedractitioners

s

being

both

ogi-

cal and

beneficialo

understanding

nd

developing

trategic

CRM activities.

We

used

these six

criteria

o

select

key

generic

RM

processes.

A

Conceptual rameworkorCRM

Grabner-Kraeuter

nd

Moedritscher

2002)

suggest

hat he

absenceof

a

strategic

rameworkor

CRM from

which

o

define

uccess s

one

reason or

he

disappointing

esults f

many

RM

initiatives.his

viewwas

supported

oth

y

the

senior

xecutives e

interviewed

uring

ur

research

nd

by

Gartner's

2001)

research.

ur

next

hallenges

were o

identify

ey

generic

RM

processes

sing

the

previously

described

election

riteria

nd to

develop

hem

nto con-

ceptual

rameworkor

CRM

strategy

evelopment.

Our

iterature

eview

ound hat

ew

CRM

frameworks

exist;

hose hat

id

werenot

based

on a

process-oriented

cross-functional

onceptualization

f CRM. For

example,

Sue and Morin

2001,

p.

6)

outline frameworkorCRM

based on

nitiatives,

xpected

esults,

nd

contributions,

ut

this

s

not

process

based,

and

many

nitiativesre not

explicitly

dentified

n the

framework. iner

2001,

p.

91)

develops

basic

model,

which ontains set of 7 basic

components:

database

of

customer

ctivity;

nalyses

f

the

database;

iven

he

nalyses,

ecisions bout

which

us-

tomers

o

target;

ools for

argeting

he

customers;

ow

to

build

relationships

ith the

targeted

ustomers;

rivacy

issues;andmetrics ormeasuringhe uccessoftheCRM

program. gain,

his

model,

hough

seful,

s

not cross-

functional

rocess-based

onceptualization.

his

gap

in the

literature

uggests

hat

here s a

needfor new

systematic

process-based

RM

strategy

ramework.

ynthesis

f the

diverse

oncepts

n

the

iterature

n

CRM and

relationship

marketing

nto a

single, rocess-based

rameworkhould

provide ractical

nsights

o

help

ompanies

chieve

reater

successwith

RM

strategy

evelopment

nd

mplementation.

InteractionResearch

Conceptual

rameworksnd

theory

re

typically

asedon

combiningreviousiterature,ommon ense, ndexperi-

ence

(Eisenhardt

989).

In

this

research,

e

integrated

synthesis

f

the

iterature ith

earning

rom

ield-based

interactions

ith

xecutiveso

develop

nd refine

heCRM

strategy

ramework.n

this

approach,

we

used what

Gummesson

2002a)

terms

interactionesearch. This

form

f

research

riginates

rom is

view

that interaction

and

communication

lay

a crucial

role in the

stages

of

research

and

that

testing oncepts,

deas,

and

results

through

nteraction

ith

ifferent

arget

roups

s an

inte-

gral part

of

the

whole

research

rocess

p.

345).

The

sources or

hese

ield-based

nsights,

hich

nclude

xecu-

tives

primarily

rom

arge

enterprises

n the

business-to-

business nd business-to-consumerectors, ncluded he

following:

'An

expert

anel

f

34

highly

xperienced

xecutives;

'Interviews

ith

0

executives

orking

n

CRM,

marketing,

and T

roles n

ompanies

n

he inancial

ervices

ector;

'Interviewsith

ix

xecutives

rom

arge

RM vendors

nd

with

five

executives

rom

hreeCRM

and

strategy

consultancies;

'Individual

nd

group

iscussionsith

RM,

marketing,

nd

IT

managers

t

workshops

ith

8 CRM

vendors,

nalysts,

and their

lients,

ncluding

ccenture,

aan,

BroadVision,

Chordiant,

DS,

E.piphany,

ewlett-Packard,

BM,

Gartner,

NCR

Teradata,

eoplesoft,

racle,

AP,

SAS

Institute,

Siebel,

ybase,

nd

Unisys;

'Piloting

he rameworks a

planning

ool n

he

inancialer-

vices nd

utomotive

ectors;

nd

'Using

he

ramework

s a

planning

ool n

two

ompanies:

global

elecommunicationsnd

global ogistics.

ix

work-

shops

were

eld n

ach

ompany.

Process

Identification

nd

the CRM

Framework

We

began

by

identifying

ossible

generic

RM

processes

from

he

CRM

and

related

usiness

iterature.

e then

is-

cussed

these

tentative

rocesses

interactively

ith

the

groups

f

executives. he

outcome

fthiswork

was

a

short

A

Strategic

rameworkor

RM

169




5/11

list of seven

processes.

We then sed the

expert anel

of

experienced

RM executives hohad

assisted

n

the

devel-

opment

f the

process

election chema o nominate he

CRM

processes

hat

hey

onsidered

mportant

ndto

agree

on those

hat

were

hemost elevant

nd

generic.

fter n

initial

roupworkshop,

ach

panel

member

ndependently

completed

list

representing

is or her view of the

key

generic

processes

hat

met the six

previously

greed-on

process

riteria. he datawere edbackto this

roup,

nd

a

detaileddiscussion

ollowed o

help

confirm

ur under-

standing

fthe

process

ategories.

As a result f this nteractive

ethod,

iveCRM

pro-

cessesthatmet he election

riteria ere

dentified;

ll five

were

agreed

on as

importanteneric

rocessesby

more

than wo-thirdsf the

group

n the first teration.

ubse-

quently,

e received

trong

onfirmation

f these s

key

generic

RM

processes

y

several fthe other

roups

f

managers.

he resultant

ive

eneric

rocesses

were

1)

the

strategy evelopment

rocess,

(2)

the

value creation

process,

3)

the multichannel

ntegrationrocess,

4)

the

information

anagementrocess,

nd

5)

the

performance

assessment

rocess.

We thenncorporatedhese ivekeygeneric RM pro-

cesses

nto

preliminaryonceptual

ramework.

his nitial

framework

nd

the

development

f

subsequent

ersions

were

both nformed

y

and further

efined

y

our nterac-

tionswith

wo

primary

xecutive

roups:

mangers

rom

he

previously

oted

companies

and

executives

rom hree

CRM

consulting

irms.

articipants

t several cademic

conferences

n

CRM and

relationship

marketing

lso

assisted

with

omments

ndcriticismsf

previous

ersions.

With

volving

ersions f the

framework,

e

combined

synthesis

f relevant

iterature ith

ield-based

nteractions

involving

he

groups.

he

framework

ent

hrough

con-

siderable

umber f

major

terationsnd

minor

evisions;

the inal ersionppearsnFigure .

This

conceptual

ramework

llustrateshe

nteractiveet

of

strategic

rocesses

that commences

with a

detailed

review

f an

organization's

trategy

the

strategy

evelop-

ment

rocess)

nd

concludes

with

n

improvement

n busi-

ness results nd

increased

hare

value

(the

performance

assessment

rocess).

The

concept

hat

ompetitive

dvan-

tage

tems

romhe reation

f value

for he

ustomer

nd

for the

business

nd

associated ocreation

ctivities

the

value

creation

rocess)

s well

developed

n

the

marketing

literature.

or

arge

ompanies,

RM

activity

ill nvolve

collecting

nd

ntelligently

sing

ustomer

nd other

ele-

vantdata

the

nformation

rocess)

o build

consistently

superior

ustomer

xperience

nd

enduring

ustomerela-

tionships

the

multichannel

ntegrationrocess).

The

itera-

tivenature

f CRM

strategy

evelopment

s

highlighted

y

the

rrows

etween

he

processes

n both irections

n

Fig-

ure

2;

they represent

nteraction

nd

feedback

oops

betweenhe

different

rocesses.

he

circular rrows

n

the

value creation

rocess

reflect he

cocreation

rocess.

We

now examine

he

key

components

e

identified

n each

process.

As

with

our

prior

work,

we used the

nteraction

research

method

n the

identification

f

these

process

components.

Strategy

evelopment

rocess

This

processrequires

dual focus on the

organization's

business

trategy

nd its customer

trategy.

ow well the

two interrelate

undamentally

ffects he success of its

CRM

strategy.

Business

Strategy

The

business

trategy

ust e considered irsto determine

how

the ustomer

trategy

hould e

developed

nd how t

should volve ver ime. hebusiness trategyrocess an

commencewith review r articulationf a

company's

vision,

especially

as

it

relates

to

CRM

(e.g.,

Davidson

2002).

Next,

the

industry

nd

competitive

nvironment

should be reviewed.

Traditional

ndustry nalysis e.g.,

Porter

980)

shouldbe

augmented y

more

ontemporary

approaches

e.g.,

Christensen

001;

Slater nd

Olson

2002)

to

nclude

o-opetitionBrandenburger

ndNalebuff

997),

networksnd

deeper

nvironmental

nalysis

Achrol

997),

and

the

mpact

f

disruptiveechnologies

Christensen

nd

Overdorf

000).

Customer

Strategy

Whereas usiness

trategy

s

usually

he

responsibility

f

the

hief

xecutive

fficer,

he

board,

ndthe

trategy

irec-

tor,

ustomer

trategy

s

typically

he

responsibility

f the

marketing epartment.

lthough

RM

requires

cross-

functional

pproach,

t s often ested

n

functionally

ased

roles,

ncluding

T

and

marketing.

hen different

epart-

ments re involved

n the

two

areas

of

strategy evelop-

ment,

pecialemphasis

hould e

placed

on

the

lignment

and

ntegration

fbusiness

trategy.

Customer

trategy

nvolves

xamining

he

existing

nd

potential

ustomerase

and

dentifying

hich orms f

eg-

mentation

re most

ppropriate.

s

part

f this

rocess,

he

organizationeedsto consider

he

evel

of subdivision

or

customer

egments,

r

segment ranularity.

his involves

decisions

boutwhether

macro,

micro,

r one-to-one

eg-

mentation

pproach

s

appropriate

Rubin

1997).

Several

authors

mphasize

he

potential

or

shifting

from

mass

market o an

individualized,

r

one-to-one,

marketing

nvironment.

xploiting

-commerce

pportuni-

ties

and thefundamental

conomic

haracteristics

f the

Internet

an

enable

a

much

deeper

evel of

segmentation

granularity

han

s

affordable

n most ther

hannels

e.g.,

Peppers

nd

Rogers

1993,

1997).

n

summary,

he

trategy

development

rocess

nvolves

detailed ssessment

f

busi-

ness

strategy

nd

the

development

f an

appropriate

us-

tomer

trategy.

his should

provide

he

enterprise

ith

clearer

platform

n which

o

develop

and

implement

ts

CRM activities.

ValueCreation

rocess

The value

creation

rocess

ransforms

he

outputs

f

the

strategy evelopment

rocess

into

programs

hat both

extract

nd

deliver

alue.The three

key

elements

f

the

value

creation

rocess

re

1)

determining

hat

valuethe

company

an

provide

o ts

customer;

2)

determining

hat

value

the

ompany

an receives

romts

customers;

nd

3)

170/Journal

f

Marketing,

ctober

005




6/11

A

Strategic

rameworkor RM 171

Customer segment lifetime value analysis

Physical

virtual

Intrigated channel management

FIGURE

2

A

Conceptual

Framework

for

CRM

Strategy

Strategy

Development

Value

Creation

Multichannel

Integration

Performance

Process

Process

Process

Assessment

Process

Business

trategy

?Business

vision

?Industry

and

competitiveharacteristics

Customer

trategy

?Customer

choice

and

customer

characteristics

?Segment

granularity

Value

Customer

Receives

?Value

roposition

?Value

assessment

Cocreation

vf4

Value

Organization

Receives

?Acquisition

conomics

?Retention

conomics

Data

Repository

Shareholder

Results

?Employer

value

?Customer

value

?Shareholder

valu(

?Cost

reduction

Performance

onitoring

?StandardsQuantitative

and

qualitative

easurement

?Results

and

key

performance

indicators

Sales

force

Outlets

Telephony

Direct

marketing

Electronic

ommerce

Mobile

commerce

IT

systems

Analysis

tools

Front

office

applications

Back

office

applications

Information

Management

Process




7/11

by

successfullymanaging

his value

exchange,

which

involves

process

f cocreation

r

coproduction,

aximiz-

ing

he

ifetime

alue

of

desirable

ustomer

egments.

The

Value

the

Customer

Receives

The

value

the customer

eceives

from he

organization

draws n the

oncept

f thebenefits

hat nhance

he us-

tomer

ffer

Levitt

969;

Lovelock

1995).

However,

here

s

now

a

logic,

whichhas evolved

from

arlier

hinking

n

business-to-businessndservicesmarketing,hat iews he

customer

s

a

cocreator

nd

coproducer

Bendapudi

nd

Leone

2003;

Prahalad

nd

Ramaswamy

004;

Vargo

nd

Lusch

2004).

These

benefitsan

be

integrated

n theform

of a

value

proposition

e.g.,Lanning

nd Michaels

1988;

Lanning

nd

Phillips

1991)

that

xplains

he

relationship

among

he

performance

f the

product,

he

fulfillmentf

the

ustomer's

eeds,

ndthe otal ost o

the ustomer

ver

the

ustomer

elationship

ife

ycle

Lanning

nd

Michaels

1988).

Lanning's

1998)

laterwork

n value

propositions

reflects

he cocreation

perspective.

However,

a

more

detailed

ynthesis

f

work

n this

rea s needed

n further

research.

To determinehetherhevaluepropositions likely o

result

n a

superior

ustomer

xperience,

company

hould

undertake

value

ssessment

o

quantify

he

elative

mpor-

tance

that

ustomers

lace

on thevarious ttributes

f

a

product. nalytical

ools

such

as

conjoint

nalysis

an be

used

to

identify

ustomers

hat

hare ommon

references

in

terms

f

product

ttributes.

uch

tools

may

also reveal

substantial

arket

egments

ith

ervice

eeds

hat re not

fully

atered

o

by

the ttributes

f

existing

ffers.

The Value

the

Organization

Receives and

Lifetime

Value

From

his

erspective,

ustomer

alue

s

the

utcome

f

the

coproductionfvalue, hedeploymentf mprovedcquisi-

tion

nd retention

trategies,

nd

theutilization

f effective

channel

management.

undamental

o this

oncept

f

cus-

tomer

value

are

two

key

elements

hat

require

further

research.

irst,

t s

necessary

o

determine

ow

xisting

nd

potential

ustomer

rofitability

aries

cross

different

us-

tomers

nd customer

egments.

econd,

he

economics

f

customer

cquisition

nd

customer

etention

nd

opportuni-

ties

for

cross-selling,

p-selling,

nd

building

ustomer

advocacy

must

be

understood.

ow

these

elements

on-

tribute

o

increasing

ustomer

ifetimealue

s

integral

o

value

reation.

Customer

etention

epresents

significant

art

f the

research n value creation. or example,Reichheld nd

Sasser

1990)

identify

he

net

present

alue

profit

mprove-

ment

f

retaining

ustomers,

nd

Rust

nd

Zahorik

1993)

and

Rust,

Zahorik,

nd

Keiningham

1995)

outline

roce-

dures

for

ssessing

he

mpact

f

satisfaction

nd

quality

improvement

fforts

n customer

etention

nd

market

share.

More

recently,

esearch

as

emphasized

ustomer

equity

e.g.,

Blattberg

nd

Deighton

996;

Hogan,

Lemon,

and

Rust

002;

Rust,

emon,

nd

Zeithaml

004).

Calculat-

ing

the

customer

ifetime

alue

of different

egments

enables

organizations

o focus

on

the

most

profitable

us-

tomers nd customer

egments.

he

value creation

rocess

is a

crucial

omponent

f

CRM because

t

translates

usi-

ness

and customer

trategies

nto

pecific

alue

proposition

statements

hat

emonstratehat alue

s to be deliveredo

customers,

nd

thus,

t

explains

what

alue s to be received

by

the

rganization,

ncluding

he

potential

or ocreation.

Multichannel

ntegration

Process

The multichannel

ntegrationrocess

s

arguably

ne

of

the

mostmportantrocessesnCRM because t takes he ut-

puts

of thebusiness

trategy

nd

value creation

rocesses

and

translates

hem nto

value-adding

ctivities ith

us-

tomers.

owever,

here

s

only

small

mount f

published

work

nthemultichannel

ntegration

n

CRM

(e.g.,

Fried-

man and

Furey

999;

Funk

2002;

Kraft

000;

Sudharshan

andSanchez

1998;

Wagner

000).

The multichannel

nte-

gration

rocess

focuses

n decisions bout

what he

most

appropriate

ombinations

f channels

o use

are;

how to

ensure hat hecustomer

xperiences

ighly ositive

nter-

actions

within hose

hannels;

nd when

customernter-

actswith

more han ne

channel,

ow

to create nd

present

a

single

nified

iewof

the ustomer.

Channel

Options

Today,

many ompanies

nter hemarket

hrough

hybrid

channel

model

Friedman

nd

Furey

1999;

Moriarty

nd

Moran

1990)

that

nvolves

multiple

hannels,

uch

s field

sales

forces, nternet,

irect

mail,

business

partners,

nd

telephony.

here

are

a

growing

umber

f channels

by

which

company

aninteract ith

ts customers.

hrough

an iterative

rocess,

we

categorized

he

many

channel

options

nto ix

categories

roadly

ased

on

thebalance

of

physical

r virtual ontact

see

Figure

).

These

nclude

1)

sales

force,

ncluding

ield

ccount

management,

ervice,

and personalrepresentation;2) outlets,ncluding etail

branches,tores,

epots,

nd

kiosks;

3)

telephony,

nclud-

ing

traditional

elephone,

acsimile,

elex,

nd call

center

contact;

4)

direct

marketing,

ncluding

irect

mail,

radio,

and traditional

elevision

but

excluding

-commerce);

5)

e-commerce,

ncluding

-mail,

he

nternet,

nd nteractive

digital

elevision;

nd

(6)

m-commerce,

ncluding

mobile

telephony,

hort

message

ervice nd

text

messaging,

ire-

less

application

rotocol,

nd 3G

mobile

services.

ome

channels

re now

being

used

n

combination

o

maximize

commercial

xposure

nd

return;

or

xample,

here

s col-

laborative

rowsing

nd nternet

elay

hat,

sed

by

compa-

nies such

s

Lands

End,

and voice

over

P

(Internet

roto-

col),whichntegratesoth elephonynd the nternet.

Integrated

Channel

Management

Managing

ntegrated

hannels

elies

n

the

bility

o

uphold

the ame

high

tandards

cross

multiple,

ifferent

hannels.

Having

stablished

set

of standards

or ach

channel

hat

defines

n

outstanding

ustomer

xperience

or hat

han-

nel,

the

organization

an

then

work

o

integrate

he

chan-

nels.

The

concept

of

the

perfect

ustomer

xperience,

which

must

e affordable

or he

ompany

n the

ontext

f

the

egments

n

which

t

operates

nd

ts

competition,

s

a

172/

Journal

f

Marketing,

ctober

005




8/11

relatively

ew

oncept.

his

concept

s now

being

mbraced

in

industry y companies

uch as

TNT,

Toyota's

Lexus,

Oce,

andGuinness

reweries,

ut thas

yet

o receivemuch

attention

n

the cademic iterature.

herefore,

ultichannel

integration

s

a

critical

rocess

n CRM because

t

repre-

sents

he

point

f cocreation

f

customer alue.

However,

company's bility

o

executemultichannel

ntegration

uc-

cessfully

s

heavily

ependent

n

the

organization'sbility

to

gather

nd

deploy

ustomernformationrom ll chan-

nels nd to

ntegrate

t

with ther

elevant

nformation.

Information

anagement

rocess

The nformation

anagementrocess

s

concerned ith he

collection,ollation,

nduse of

customer

ata nd nforma-

tionfrom

ll customerontact

oints

o

generate

ustomer

insight

nd

appropriate arketing

esponses.

he

key

mate-

rial

elements f

the

nformation

anagementrocess

re

thedata

repository,

hich

rovides

corporatememory

f

customers;

T

systems,

which

nclude

he

organization's

computer

ardware,

oftware,

nd

middleware;

nalysis

tools;

and

front ffice

nd back

office

pplications,

hich

support

he

many

ctivitiesnvolved n

interfacing

irectly

with ustomersndmanagingnternalperations,dminis-

tration,

nd

supplier elationships

Greenberg

001).

Data

Repository

The data

repositoryrovides

powerfulorporate

emory

of

customers,

n

integrated

nterprisewide

ata

tore hat s

capable

of

relevant ata

nalyses.

n

larger rganizations,

t

may omprise

data

warehouse

Agosta

1999;

Swift

000)

and related

ata marts

nd

databases.

here re

two forms

of

data

warehouse,

he

onventionalata

warehouse

nd

the

operational

ata tore. he

atter

tores

nly

he

nformation

necessary

o

provide

single dentity

or

ll customers.n

enterprise

ata model

s used tomanage hisdataconver-

sion

process

o

minimize ata

duplication

nd to

resolve

any

nconsistenciesetween

atabases.

IT

Systems

Information

echnologyystems

efer o

the

omputer

ard-

ware

and the

related

oftwarend

middleware sed n the

organization.

ften,

echnologyntegration

s

required

before

atabases an

be

integrated

nto

data

warehouse

and user

ccesscan be

provided

cross

he

ompany.

ow-

ever,

he

historical

eparation

etween

marketing

nd IT

sometimes

resents

ntegration

ssues at

the

organizational

level

(Glazer

1997).

The

organization's

apacity

o

scale

existing ystemsr toplanfor hemigrationolarger ys-

tems

without

isrupting

usiness

perations

s

critical.

Analytical

Tools

The

analytical

ools

that

nable

effective se of

the

data

warehouse an

be

found n

general

ata-mining

ackages

and n

specific

oftware

pplication

ackages.

Data

mining

enables he

nalysis

f

arge uantities

f

data

to

discover

meaningful atterns

nd

relationships

e.g.,

Groth

000;

Peacock

1998).

More

specific

oftware

pplication

ack-

ages

include

nalytical

ools

thatfocus

on

such

tasks

as

campaignmanagementnalysis,

redit

coring,

nd cus-

tomer

rofiling.

Front

Office nd

Back

Office

Applications

Front

ffice

pplications

re the

technologies

company

uses to

support

ll those ctivities

hat nvolve irect nter-

face

with

ustomers,

ncluding

FA

and

call

center

manage-

ment.

ack office

pplicationsupport

nternal

dministra-

tion ctivities nd

supplier elationships,ncluding

uman

resources, rocurement,arehousemanagement,ogistics

software,

nd some

financial

rocesses.

A

key

concern

about

he

front

nd back

office

ystems

ffered

y

CRM

vendors

s that

hey

re

ufficiently

onnectedndcocoordi-

nated

o

mprove

ustomer

elationships

nd workflow.

CRM

Technology

Market

Participants

Gartner

egments

endors f

CRM

applications

nd CRM

service

providers

nto

specific

ategories

Radcliffe

nd

Kirkby

002),

and

Greenberg

2001)

and

Jacobsen

1999)

provide

etailed eviews

f CRM vendors'

roducts.

he

key

segments

or

CRM

applications

re

Integrated

RM

and

Enterprise

esource

lanning

uite

e.g.,

Oracle,

Peo-

pleSoft, AP), CRM Suite e.g.,Epiphany, iebel),CRM

Framework

e.g.,

Chordiant),

RM Best of

Breed

(e.g.,

NCR

Teradata;

roadvision),

nd

Build t Yourself'

e.g.,

IBM, Oracle,

un).

The CRM

service

roviders

ndconsul-

tants

hat

ffer

mplementationupportpecialize

n the

ol-

lowing

areas:

corporate

trategye.g.,

McKinsey,

Bain);

CRM

strategy

e.g.,

Peppers

&

Rogers,

Vectia);

change

management,

organization

design,

training,

human

resources,

nd

so forth

e.g.,

Accenture);

usiness

ransfor-

mation

e.g.,

IBM);

infrastructure

uilding

nd

systems

integration

e.g.,

Siemens,

nisys);

nfrastructure

utsourc-

ing

(e.g.,

EDS,

CSC);

business

nsight,

esearch,

nd

so

forth

e.g.,

SAS);

and

business

rocess

outsourcing

e.g.,

Acxiom). heneedfor omprehensivendscalableoptions

has

created

cope

for

many

ew

products

rom

RM

ven-

dors.

However,

espite

heir laim

to be

complete

RM

solution

roviders,

ew

software

endors

an

provide

he

full

range

f

functionality

hat

complete

RM

business

strategy

equires.

The

nformation

anagement

rocess

rovides

means

of

haring

elevant

ustomernd

other

nformation

hrough-

out the

enterprise

nd

replicating

he mind

of the

cus-

tomer. o

ensure hat

echnology

olutions

upport

RM,

it

s

important

o

conductT

planning

rom

perspective

f

providing

seamless

ustomer

ervice ather

han

lanning

for

functional

r

product-centered

epartments

ndactivi-

ties.Furthermore,ataanalysis ools houldmeasure usi-

ness

activities. his

kind

f

analysis

rovides

he

basis for

the

performance

ssessment

rocess.

Performance

ssessment

Process

The

performance

ssessment

rocess

overs

he

essential

task

of

ensuring

hat he

organization's

trategic

ims in

terms

f

CRM

are

being

delivered

o

an

appropriate

nd

acceptable

tandard

nd

that

basis for

uture

mprovement

is

established.

his

process

an

be

viewed s

having

wo

A

Strategic

ramework

or

RM

173




9/11

main

components:

hareholder

esults,

which

provide

macro

view of the

overall

elationships

hat

drive

perfor-

mance,

and

performance

onitoring,

hich

provides

more

detailed,

micro

iewof metrics nd

keyperformance

indicators.

Shareholder

Results

To achieve he

ultimate

bjective

f

CRM,

the

delivery

f

shareholder

esults,

he

rganization

hould

onsider ow o

build

employee

value,

customer

alue,

and

shareholder

value ndhowtoreduce osts.Recent esearch nrelation-

ships

mong

mployees,

ustomers,

nd shareholdersas

emphasized

he need

to

adopt

a more

nformednd inte-

grated

pproach

o

exploiting

he

inkages

mong

hem. he

service

rofit

hain

model nd related

esearch ocuses n

establishing

he

elationshipsmong

mployee

atisfaction,

customer

oyalty, rofitability,

nd

shareholderalue

e.g.,

Heskett t al.

1994;

Loveman

1998).

Organizations

lso

need o focus n cost

reduction

pportunities.

womeans f

costreductionre

especially

elevanto CRM:

deployment

of

technologies

anging

rom

utomated

elephony

ervices

to

Web ervices

nd

the se ofnew lectronichannels uch

as

online,

elf-serviceacilities. he

development

fmodels

such as

the

service

profit

hain has been

important

n

enablingompanies

o consider he ffectivenessfCRM at

a

strategic

evel

n

terms f

mproving

hareholder

esults.

Performance

Monitoring

Despite growing

all

for

ompanies

o

be more

ustomer

oriented,

here s

concern

hat,

n

general,

hemetrics sed

by

companies

o measure nd monitor heir

RM

perfor-

mance are not well

developed

or

well communicated.

Ambler's

2002)

research

indings

aise

particular

oncern.,

he finds hat

ey

spects

f

CRM,

such as customeratis-

factionndcustomer

etention,

nly

each he oard n 36%

and 51% ofcompanies, espectively.venwhen hesemet-

rics each

he

oard

evel,

t

s

not learhow

deeply hey

re

understood

nd how much ime

s

spent

n them. radi-

tional

erformance

easurement

ystems,

hich end o be

functionally

riven,

may

be

inappropriate

or cross-

functionalRM.

Recent efforts o

provide

cross-functional

easures,

such s thebalanced

corecard

Kaplan

and Norton

996),

are

a

useful

dvance.

he format

f

thebalanced corecard

enables wide

range

f metrics

esigns.

ndicatorshat an

reveal future

inancial

esults,

ot

ust

historical

esults,

need to be

considered

s

part

of this

process.

Standards,

metrics,

nd

key performance

ndicators

or

CRM

should

reflectheperformancetandardsecessarycross hefive

majorprocesses

o ensure hat RM activitiesre

planned

and

practiced

ffectively

nd

that feedback

oop

exists o

maximize

performance

mprovement

nd

organizational

learning.

A consideration

f return

n

relationships

(Gummesson004)

will ssist

n

dentifying

urther etrics

that rerelevant

o the

nterprise.

Discussion

In

this

rticle,

e

develop

cross-functional,

rocess-based

CRM

strategy

ramework

hat ims

o

help ompanies

void

the

potential

roblems

ssociated

with

narrow

echnologi-

cal

definitionf

CRM

and realize

strategic

enefits. ur

research

was basedon

large

ndustrial

ompanies

ecause

the ize and

complexity

f such

nterprises

s

likely

o

pre-

sent the

greatest

RM

challenges.

We did

not examine

issues

related o small or

medium-sized

ompanies

nd

nonprofitrganizations

n

thiswork.

This

tudy

ontributes

o

the

marketing

iteraturen

sev-

eral

ways.

First,

urwork

xtends

managerial

erspective

that tresses he

mportance

f

cross-functional

rocesses

n

CRM

strategy

nd contributeso the

positioning

f the

poorly

efined RM

concept

within he

marketing

itera-

ture.

econd,

t

provides

process-based

onceptual

rame-

work or

trategic

RM and dentifies

ey

lements

ithin

each

process.

Third,

t makes

contributiono

the imited

literature

n

interaction

esearch.

inally,

he

research

ep-

resents

grounded

ontributionhat ffers

anagersnsight

into he

development

nd

implementation

f

CRM strate-

gies.

To

date,

his ramework

as been used

by

companies

to address

everal

ssues,

ncluding

urfacing roblematic

CRM

issues,

lanning

he

key

omponents

f

a CRM strat-

egy, dentifying

hich

rocess

omponents

f

CRM should

receive

riority,reating platform

or

hange,

nd

bench-

marking

ther

ompanies'

RM activities.

Much

research

emains o be

done n the

xploration

f

the

multifacetedature

f

CRM. Sheth

1996)

notes hat or

an

emerging

anagement

iscipline,

t

s

important

o have

an

acceptable

efinitionhat

ncompasses

ll facets o focus

understanding

nd

growth

f

knowledge

n the

discipline.

He

proposes

multistage

rocess

for

achieving

his that

begins

with

elimiting

he

domain,

greeing

n a

definition,

developing erformance

easures,

nd

developingxplana-

tory

heory.

he frameworke

propose

n this rticle

ffers

a

potentially

seful

tartingoint

for he

development

f

improvednsight

nto

these

spects

of

CRM

theory.

he

task

of

delimiting

he

domain,greeing

n a definitionor

CRM,

and

building

research

genda

will be

an

evolving

process

n this ascent rea.We donot

ttempt

o build uch

a research

genda

n the urrent

ork;

owever,

e

empha-

size

the

mportance

f

CRM

implementation

nd

related

people

issues

as an area

in

which further esearch

s

urgently

eeded. Initial work

by

Ebner and

colleagues

(2002),

Gummesson

2002b,

c),

Henneberg

2003),

Pettit

(2002),

and

Rigby,

eichheld,

nd Schefter

2002)

provides

a

useful

platform

rom

which

to

develop

this

mportant

research rea.

Appendix

Some DefinitionsndDescriptions

of

CRM

.CRM

s ane-commerce

pplication

Khanna

001).

.CRM

is

a

term

or

methodologies,echnologies,

nd

e-

commerce

apabilities

sed

by

companies

o

manage

us-

tomer

elationships

Stone

ndWoodcock

001).

.CRM

s an

enterprisewide

nitiativehat

elongs

n

all

areas

of n

organizationSingh

nd

Agrawal

003).

.CRM

s

a

comprehensive

trategy

nd

process

f

cquiring,

retaining,

nd

partnering

ith

elective

ustomerso

create

superior

alue or

he

ompany

nd

he ustomer

Parvitiyar

and

heth

001).

1741

Journal

f

Marketing,

ctober

005




10/11

.CRM is about he

development

nd maintenance

f

ong-

term,

utually

eneficial

elationships

ith

trategically

ig-

nificantustomers

Buttle

001).

.CRM ncludes umerous

spects,

ut he asic

hemes for

the

ompany

o

become

more ustomer-centric.ethodsre

primarily

eb-basedools nd nternet

resenceGosney

nd

Boehm

000).

.CRMcanbe viewed

s

an

application

fone-to-onearket-

ing

nd

relationshiparketing,esponding

o an ndividual

customer

n the asisof what he ustomer

ays

ndwhat

else s knownbout hat ustomer

Peppers,

ogers,

nd

Dorf

1999).

.CRM s a

managementpproach

hat

nables

rganizations

o

identify,

ttract,

nd ncrease etention

f

profitable

us-

tomers

ymanagingelationships

ith hem

Hobby

999).

.CRM involves

sing

existing

ustomernformation

o

improve

ompanyrofitability

nd ustomerervice

Could-

well

999).

.CRM

ttempts

o

provide

strategic

ridge

etweennforma-

tion

echnology

nd

marketingtrategies

imed t

building

long-termelationships

nd

profitability.

his

requires

information-intensive

trategies

Glazer

997).

.CRM s data-driven

arketing

Kutner

nd

Cripps

997).

.CRM s

an

enterprise

pproach

o

understanding

nd nflu-

encing

ustomerehavior

hrough eaningful

ommunica-

tion o

improve

ustomer

cquisition,

ustomer

etention,

customeroyalty,nd ustomerrofitabilitySwift000).

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