Cranfield School of Management
Interview: Professor Adrian Payne
Handbook of CRM: Achieving Excellence in Customer
Management.
SM
Hello, this is Steve Macaulay from Cranfield School of Management.
I am here today to discuss with Professor Adrian Payne his book
Handbook of CRM: Achieving Excellence in Customer Management.
So Adrian, what led you to write the book in the first place and what
has been the reaction to it?
AP
Well, Steve, essentially the thing that led me to write this is it was a
natural progression of the four earlier books I did on relationship
marketing. One of the catalysts for actually getting the book
underway was attending a conference as one of the speakers and
hearing a speaker actually from of the large accounting firms talk
about the most complicated model in the world, which I am sure no
one understood and I thought there was real need to get to the
essence of what customer relationship management was, especially
from a strategic view aimed at creating shareholder value as
opposed to a purely technological bias, that so many organisations
are following.
SM
So what is the key message of the book that you would like people to
remember?
AP
Well, I guess there are two very, very simple messages that I think
are absolutely critical – one CRM is not about technology as the
main event. Technology can be a very important enabler, but you
can do CRM perfectly well without a huge investment in technology,
in many instances particularly with mid sized companies. The
second element is the criticality of understanding what it takes to
succeed in CRM implementation.
SM
I imagine that those messages have gone home very well.
AP
Yeah, I think they have and I have been delighted by the success of
the book and I am constantly getting a stream of e-mails asking me
questions and saying helpful that it was. So it seems to be the time
has come really for an intelligent strategic approach to CRM, rather
than a very narrow technological focus on the topic.
SM
Now, lots of people talk about CRM, but I can see from the tone in
your book that CRM is being seen as vital to succeed in the kind of
competitive environment we have got now.
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AP
Yeah, I think I tried to explain this quite simply. It's what I call the
corner shop corporation concept and this really provides the
challenge for organisations today. If we go back in time the small
corner shop would know intimately two hundred or three hundred of
its customers – it would know their name, how to address them,
whether they were a good credit risk, the name of the wife, whether
to address her as Sally or Mrs Smith, they would know the children,
the children’s names and they would be able to customise the
service, whether they give credit, whether they put a favourite
magazine under the counter when they only had a couple of issues
left or a newspaper, etc. Now the challenge as companies get
bigger and bigger is to maintain this corporate memory and the
challenge as a company grows and grows and moves from hundreds
to thousands, or perhaps even millions of customers, or it has a fairly
small customer base, but gets involved in hundreds or thousands or
tens of thousands of transactions, how does it keep this corner shop
mentality? So I would say the challenge as the world gets
increasingly competitive, is to create the look, touch and feel of the
corner shop corporation. If you can’t do that customers are going to
vote with their feet.
SM
Now, I know you have got a lot of experience of working with
organisations. In your work with these organisations that have been
successful in their CRM, what has particularly struck you and does
any one organisation stand out from the others?
AP
I think that is an exceptionally interesting question that really raises
broader issues, Steve and the broader issue is this what represents
successful CRM will depend very much on the organisation. Let me
give you some examples. For example, Citibank if we are thinking
about its corporate and institutional business has developed an
outstandingly good probably best of breed approach to key account
management and global account management. It is way ahead of
many of the other major competitive banks in this arena – in fact they
invented the concept. So for them CRM represents doing an
outstanding job in managing relationships, cross border, cross
functional in a sustained way against some very, very good
competitors. Then we take someone like First Direct Bank which is a
retail bank, they have built fantastic relationships, particularly over
the telephone and more recently over the internet, through creating
personality and being able to replicate the mind of the customer.
They can intelligently use the past history of customer transactions
and can relate in a very personable way with the customer. Other
companies like RS Components, for example, again in the business
to business context have been very successful at creating a fantastic
web interface, I mean to say it is not the only way, you can actually
go into one of their stores or use the telephone to order parts, but
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engage the customer on the internet and in the phase three of the
implementation of – they use technology from Broad Vision – they
are able to replicate the mind of the customer. By that I mean the
customer who couldn’t remember what they ordered two years ago
can actually physically go back and identify that order very quickly on
the web, can click on it, it updates and updates the price and if you
order by, I think four o’clock, it gets there by ten o’clock the next
morning. And finally, somebody like Virgin Atlantic, again they don’t
use the technological focus on CRM they use the people focus on
CRM and anybody who travels on Virgin Atlantic, I think would
recognise them as having an outstanding value proposition and
certainly very good at building relationships with their premium
customers.
SM
Now, I was struck in the book that you take a strategic aspect to
CRM and I would like you to tell me a bit about the core aspects of
this CRM strategic framework.
AP
Well I think you can characterise CRM on a continuum ranging from
at one end a rather narrow and I think slightly dysfunctional view –
CRM is about the technology through, or a particular technology,
through to another option which is about creating a better relationship
with shareholders and naturally from what I have said I guess you
will understand that I favour the latter perspective. Now, we
developed the strategic framework from empirical research with a
large number of very advanced practitioners in CRM to identify five
key cross functional processes that are present in virtually any
organisation, at any size that you care to look at. There may be
other specialist processes which are important, but the five
processes are firstly having a clear view of your business and your
customer strategy. We call that the strategy development process.
The second process is the value creation process and this is a
strategy of uniting the value you create for the customer and making
sure that you get the value back from the customer. We sometimes
called this process of interaction co-creation or co-production and it
is absolutely essential that we manage this as an integrated process
rather than seeing ourselves as in the business of extracting as
much money from the customer as possible. We should start with
thinking about what value we can deliver to the customer. Now the
third process is really where the rubber hits the road, and that is what
is called – it’s a bit of a mouthful – the multi channel integration
process. I prefer to call this in a way the customer experience zone.
It is where you attempt to make sure that every interaction that you
have with the customer is done in a consistent and logical way and
regardless of the channel that you use, you touch customers with
one voice to use a phrase that we often use in CRM. So we are
trying to create a consistent experience across channels. More than
that what we are trying to do is we are trying to create a perfect or an
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outstanding experience – obviously moderated because it has got to
be done at an affordable cost for the customer, regardless of the
channel in which they interact with us – so that is the third process.
The fourth process of the information management process – and
there are many aspects of this – but the critical aspect of this to me
at least, is that what we are trying to do is trying to create a memory
trail so that we understand all the previous transactions of the
customer, because it is my belief that the best way to keep and grow
a customer is to have the same memory, or perhaps even a better
memory, than the customers themselves. And finally, the last
process is the performance assessment process and here it is
absolutely essential that we have the right sort of metrics at all levels
in the organisation to make sure we can monitor and indeed improve
over time our CRM activities and my colleague, Tim Ambler who is
an academic down in London, Tim’s work shows very, very clearly
that a lot of these needed metrics simply don’t reach the right sorts of
people. In fact he has shown that many important, indeed critical
metrics simply don’t reach the main top board in the organisation.
From memory for example, something like only two thirds of
companies get satisfaction measures taken to the top board, which I
find absolutely astonishing. So there are the five processes that link
together in a coherent way that give you the framework and the
backbone for developing a CRM strategy.
SM
Interesting. Now one of the things that I can’t help noticing is every
single company says how customer focused they are, and yet there
are not many there are not many that I would put in the category that
you have described. How actually do you get genuine customer
responsiveness throughout the organisation?
AP
Well, I think you have got to start with where companies are at
present. My research shows that 90% of senior managers when
asked about does your chief executive say you are customer
focused, or they might used a different language – customer
oriented, market driven, etc, but essentially they mean the same
thing. And I can report to you 90% of large UK companies say they
are market oriented or have the chief executive saying they are
market oriented, market focused, or similar. Now when you ask the
same people in terms of all the people they interact with, whether
they are operating in their business life with their business customers
in their company, or whether they are dealing in an everyday basis
with their electricity company, their gas company, any utility or bank
or whatever, they will tell you that no more than 5 or 10% at the very,
very most are customer oriented. So there is a huge gap between
the rhetoric and the actual behaviour of companies. So I would say
the first task is recognition of the problem. Most companies at a top
level simply don’t believe it is important and don’t believe they are
that bad at it. And there are some simple diagnostic tests – one of
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the tests I have used quite extensively over the years is a very
simple, but quite effective one which is developed by my colleague
Philip Kotler at Northwestern University called the marketing
effectiveness order and this gives you a very quick and dirty reading
on where organisations are in a range of five different key attributes,
including customer philosophy. So that can actually give you a
reading and then of course, I think you need to put in progress, you
need to put underway, a process to try and manage that turnaround
and some organisations have been quite successful at doing that,
many have failed along the way, so it's not at all an easy task – I
mean to say British Airways in the days of Colin Marshall and John
King, for example, was a classic example of being able to turnaround
an organisation that was close to bankruptcy and being able to turn it
into a first grade organisation – sustaining that over time, of course,
has proved somewhat difficult. And the final point I make is that it's
very important, I believe, to have the metrics that reinforce
behaviour. Companies like MBNA America in the United States
have sixteen performance measures which are fed back to their
employees every single day. These are put together in a composite
measure and everyday their performance increases over a certain
level or reaches a certain level they get a percentage of that day's
profit, incidentally they measure profitability on a daily basis as well.
So they are an example of an organisation that has overcome the
folly of expecting behaviour A, whilst rewarding behaviour B. You
ought to make sure that behaviours and the reward structures are
congruent.
SM
Interesting. I would like to look at the future now and look at where
your research is heading since you published the book and any
trends that are coming out.
AP
OK, well the area that we are particularly interested in at the moment
in pursuing the whole area of CRM implementation. The last
chapter touches on this, but it is a huge area and the area that we
are particularly focusing in the balance of this year is an investigation
of all the literature that has been written and the empirical studies
around CRM try to identify the reasons for success and the reasons
for failure. People have looked at various reasons, there has been
the odd article in the Harvard Business Review and so on, but we are
trying to look very extensively using the systematic review
methodology to identify what we call the corrolates of success in
CRM, so we can try to understand across all that has been written
what are the profound the insightful learnings about what drives
success and indeed failure.
SM
Are there any early indications coming out of that that a practitioner
could pick up?
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AP
I don’t think so
SM
So, it's too early to say.
AP
Yes.
SM
Professor Payne this has been fascinating, thank you very much
indeed.
AP
You are very welcome.
Transcript prepared by Learning Services for the Knowledge Interchange
www.cranfield.ac.uk/som
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Produced by the Learning Services Team
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© Cranfield University 2007