Customer Relationship Management (CRM)Chapter 2 The CRM Value ChainLearning 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 ofdeparture. The model provides a ‘helicopter view’, giving an overview ofthe CRM landscape.

The CRM value chain sets out a five-step process for developing andimplementing CRM strategy. Each of the five primary steps isperformed with the deployment of a number of tools and processes.

These are explored in more detail later in the book. The model alsoidentifies a number of supporting conditions that facilitate successfulimplementation. 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 earnedfrom a customer relationship; for example, by selling customers additionalproducts 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’sjourney 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 ofcustomer 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 customerrelationships?

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 theCRM value chain. If the conditions are not supportive of the CRMstrategy 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 dataand information technology. Here, we want to examine the role of data in CRM.

Our definition of CRM stresses the importance of high-qualitycustomer data. Acquiring, storing, enhancing, maintaining, distributingand 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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