Customer Relationship Management (CRM)
Chapter 2 The CRM Value Chain
Learning Objectives
The five primary stages of the CRM value chain
The basic role of customer portfolio analysis, customer intimacy, network
development, value proposition development and managing the customer
lifecycle in CRM strategy development and implementation
The four supporting conditions of the CRM value chain
Why culture and leadership, data and IT, people, and process are
important contributors to CRM strategy development and implementation.
CRM Value Chain?
Introduction:
CRM is the core business strategy that integrates internal
processes and functions, and external networks, to create
and deliver value to targeted customers at a profit. It is
grounded on high-quality customer data and enabled by
information technology.
Introduction value chain?
This chapter presents a model that takes this definition as its point of
departure. The model provides a ‘helicopter view’, giving an overview of
the CRM landscape.
The CRM value chain sets out a five-step process for developing and
implementing CRM strategy. Each of the five primary steps is
performed with the deployment of a number of tools and processes.
These are explored in more detail later in the book. The model also
identifies a number of supporting conditions that facilitate successful
implementation. We explore those conditions in this chapter.
The Goal of CRM
Broadly speaking, the general aim of any CRM strategy is to develop
more profitable relationships with customers. Some companies do this by
taking cost out of the relationship; for example, by shifting customers to
web-based self-service.
Others do this by increasing the revenue earned
from a customer relationship; for example, by selling customers additional
products and services. Most companies use both of these approaches.
This core CRM objective is noted in the arrowhead at the right end of the
CRM value chain: customer profitability.
In a not-for profit context, you would work towards different CRM
objectives, such as operational efficiency or increased client satisfaction
The CRM Value Chain
The CRM Value Chain
1st primary Stage
Customer portfolio analysis: this involves an analysis of the
actual and potential customer base to identify which
customers you want to serve in the future. Top of the list will
be strategically significant customers, including those that will
generate profit (value) in the future.
The CRM Value Chain
2nd primary Stage
Customer intimacy: you will get to know the identity, profile,
history, requirements, expectations and preferences of the
customers that you have chosen to serve
The CRM Value Chain
3rd primary Stage
Network development: you will identify, brief and manage
relationships with your company’s network members. These
are the organizations and people that contribute to the
creation and delivery of the value proposition(s) for the chosen
customers.
The network can include external members such as suppliers,
partners and owners/investors, as well as one important
internal party, employees.
The CRM Value Chain
4th primary Stage
Value proposition development: this involves identifying
sources of value for customers and creating a proposition and
experience that meet their requirements, expectations and
preferences.
The CRM Value Chain
5th primary Stage
Manage the customer lifecycle: the customer lifecycle is the customer’s
journey from ‘suspect’ towards ‘advocate status’. Managing the lifecycle
requires attention to both process and structure:
Process: how will the company go about the important processes of
customer acquisition, customer retention and customer development,
and how will it measure the performance of its CRM strategy?
Structure: how will the company organize itself to manage customer
relationships?
The CRM Value Chain
The Supporting stages
These are:
• Leadership and culture
• Data and information technology (IT)
• People
• Processes.
These four conditions influence each of the five primary stages of the
CRM value chain. If the conditions are not supportive of the CRM
strategy then its implementation is less likely to succeed.
Leadership and Culture:
• Leadership is needed to prioritize the CRM programme
• Leadership provides oversight
• Leadership breaks down the functional silo walls
• Is leadership determined to make a positive difference to
customer experience?
• Does leadership provide a ‘customer first’ role model that
employees want to follow?
Leadership and Culture:
• Leadership is needed to prioritize the CRM programme
• Leadership provides oversight
• Leadership breaks down the functional silo walls
• Is leadership determined to make a positive difference to
customer experience?
• Does leadership provide a ‘customer first’ role model that
employees want to follow?
Data & IT:
The second major supporting condition for CRM implementations is data
and information technology. Here, we want to examine the role of data in
CRM.
Our definition of CRM stresses the importance of high-quality
customer data. Acquiring, storing, enhancing, maintaining, distributing
and using customer information are critical elements of CRM strategies.
The data requirements of a CRM strategy are determined by the
decisions made and the activities undertaken in the five main stages of
the CRM value chain
People:
People are the third supporting condition for successful CRM
implementation. Many commentators believe that people are the most
important element in the performance of a CRM strategy. Why is this
so?
• People develop the CRM strategy
• People select the IT solution
• People implement and use the IT solution
• People co-ordinate with each other across functions to make CRM
work
• People create and maintain the customer database
• People design the marketing, selling and service processes
• People may need to change established work practices
• People contribute importantly to customer satisfaction and retention
when they interact with customers.
Processes:
Processes are the fourth and final supporting condition for
CRM delivery. Processes are the way in which things are
done by the company.
From a CRM perspective, processes need to be designed
and operated so that they contribute to the creation of value,
or at least do not damage the value being created, for
customers.
This implies both efficiency (low cost)
and effectiveness (delivers the desired outcomes)
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