A
Strategic Framework of CRM
Introduction
In the mid-1990s
until now, information technology (IT) has shaped the way companies organize
their business process, communicate with customers, sell products, and provide services.
An effective and efficient alignment between companies’ processes and its customers’
needs becomes a primary factor for a successful company in the highly
competitive market (Wailgum, 2007). For example, to manage a company-customer
relationship or customer relationship management (CRM), a company may work with
customers in different ways such as Web sites, mail launch, wall stores, call
centers, mobile service, advertising efforts and marketing campaigns. CRM is a primary
focus by business industry leaders and academic communities due to a lack of
agreement about CRM concepts.
Based on
the scholarly article “A Strategic Framework for Customer Relationship
Management by Payne and Frow (2005), this document (Unit 1 Individual Project)
will define CRM concepts and its role under three alternative perspectives. It
will utilize a cross-functional process-based approach to CRM and examine the
conceptual framework of the customer relationship management constructed from
five key processes in-depth. The discussion will address the insight of the
successful CRM strategy and implementation.
What is CRM?
According to the authors Payne
and Frow (2005), a customer relationship management or CRM was rooted from SFA
(Sale Force Automation), or information-enabled relationship marketing in the
information technology (IT) vendor and practitioner community (Ryals &
Payne, 2001). CRM was defined differently among scholars, practitioners, and
authorities. After a review of the literature from the past, the authors suggest
that CRM can be defined based on three perspectives (1) a narrow and tactical
approach, (2) a broad and strategic approach, and (3) a customer-centric
approach as shown in Figure 1 below:
Figure 1: CRM is defined based on Perspectives 1
(left), 2 (middle), and 3 (right)
Source: Adapted from Payne and Frow, 2005.
The companies use the customers-centric CRM to manage Sales (telephone, the
Web, retail store, and field sales), Marketing (campaign data, content, and
data analysis), and Services (call center data, Web self-service data, and
wireless data) in a company as shown in Figure 2:
Figure 2: CRM is used to manage
Sales, Marketing, and Services
Source: Adapted from Pearlson and Saunders,
2004.
The authors provide their definition
of the CRM based on the perspective 3 as follows:
“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”.
CRM use information technology and
human resources to gain insight in customers’ value and behaviors to increase
the company’s revenue. CRM’s goals are (1) providing products to meet
customers’ needs, (2) providing better customer service, (3) cross-selling
products more effectively, (4) assisting sales staff to close the deals
quickly, (5) retaining the current customers, and (6) acquiring new customers (Wailgum,
2007).
This student defines the CRM as a
strategic process used to learn more about customers’ needs and better
understand customers’ behaviors to strengthen organizational processes to
exceed customers’ expectation in a good relationship. The strategic process
will depend on a great amount of insightful information about customers and
market trends so that the company can sell and market its products and services
effectively. CRM manages all ways to handle existing and potentially new
customers. It is a business and technology discipline. It uses information
system to coordinate entire business processes. It provides end-to-end customer
care. It supplies a unified view of customer across the company. It
consolidates customer data from multiple sources and provides analytical tools
for responding questions (Salesforce, 2017).
Conceptual Framework of the CRM
To develop the conceptual framework
for the customer relationship management, Payne and Frow (2005) use interaction research that combines
previous literature, common sense, and experience in field-based interaction
with executives from big companies (Gummesson, 2002). They establish six
criteria as a guideline to identify these strategic processes. Six criteria
consist of (1) small set of processes is used to achieve an organization’s
goals, (2) each process contributes to the value creation process, (3) each
process is at strategic and macro level, (4) the processes support clear
inter-relationships, (5) each process is cross-functional, and (6) each process
is logical and beneficial to develop strategic CRM activities. From these
strategic processes, the authors establish the process-oriented
cross-functional conceptualization of CRM.
The process-oriented
cross-functional CRM includes five key interactive sets of strategic processes
that start with a review of strategy activities and end with the improvement in
business performance results as shown in Figure 3. These key strategic
processes sets, that are (1) process of developing strategies, (2) process of
creating values, (3) process of integrating multi-channels, (4) process of
managing information, and (5) process of assessing performance, interact with
them in bi-directions and iterations.
Figure 3: The conceptual process-oriented
cross-functional framework of CRM
Process of developing strategies
The process of developing strategies
focuses on business strategy and customer strategy. A company chooses
strategies based on three elements: (1) operational effectiveness, (2)
competitive forces, and (3) strategic information systems for a strategic
position of differentiation, low cost, or focus (Aurik, Fabel & Jonk,
2015). Business strategy should be considered first with a review of its
business mission and vision then the industry and competitive environment by
CEO or the board. The arsenal of advanced statistics and analytics tools are
often used for analysis (Porter, 1996). Customer strategy relates to examine
the existing and potential customer base and determine appropriate forms of
segmentation. The process of developing strategy establishes a solid platform
to develop and implement CRM activities.
Process of creating values
The process of creating values converts
the outputs of the process of developing strategies into programs that extract
and deliver values for both company and customers.
This process
determine (1) the value provided by a company to a customer, (2) the value from
customers received by the company, and (3) managing the value exchange between
the company and customers in process of co-creation, coproduction and
maximizing the life-time value of customer segments (Levitt, 1969; Reichheld
& Sasser, 1990)
Process of integrating multi-channels
The process of integrating
multi-channels is one of the most important processes in CRM because it takes
the outputs of the process of developing business strategy, and the process
creating values and converts them into value-adding activities in different business
units or departments, e.g., sale force, outlets, telephony, direct marketing,
electronic commerce, and mobile commerce, etc. It focuses on decision-making
for the most suitable combination of units to interact with customers under a
single unified view of the certain customers (Wagner, 2000).
Process of managing information
The process of managing information
is a process of capturing, collecting and storing customer data and information
from all customer contacts points for the analyses to obtain customer insight
and marketing responses. Data of customers is stored and maintained in a
reliable repository or databases in IT system. IT system that includes computer
hardware, software platform, analytical and statistical tools, and front office
and back office applications supports many activities between the process of
managing information and other key strategic processes. The activities can be interfacing
with customers and managing administration, internal operations, and supplier
relationships (Greenberg, 2001).
Process of assessing performance
The process of assessing performance
ensures that the strategic goals in the CRM being achieved to the highest
standard and served as a basic line for future improvement. This process
consists of two main components: shareholder results and performance
monitoring. Shareholder results present an overview of the overall customer
relationships that display performance. Performance monitoring displays a
detailed view of measurable metrics and key CRM performance indicators such as
customer satisfaction, customer retention. Some formats from methods such as
balanced scorecard or Hoshin management can show metrics on future financial
results (Kaplan & Norton, 1996).
Discussion
Payne and Frow (2005) develop the
cross-functional CRM framework based on strategic processes from interaction
research with an executive panel on large-size companies. Its contribution to
marketing literature is significant due to emphasize on cross-functional
processes, point out key components within each process set, and offer the
managerial insight of CRM development. However, it brings up the question on
whether this process-oriented CRM framework would work on the mid-size or small
companies. In this case, the CRM framework needs further research because the
mid-size or small companies may not have all five strategic sets of processes,
departments, and culture to support this framework.
Conclusion
In summary, Payne and Frow
(2005) presented a highly scholarly conceptual framework on the CRM. They
explored CRM’s definition in various aspects with three alternative
perspectives. Based on interaction research, the authors pointed out the need
of the process-oriented cross-functional approach for a strategic CRM. They
provided five key sets of the CRM processes (i.e., the process of developing strategies, the process of
creating values, the process of integrating multi-channels, the process of
managing information, and the process of assessing performance) and
developed the conceptual framework based on these key processes sets. They
synthesized the diverse concepts within the literature on CRM into a single
process-oriented framework in insight to achieve success in the customer relationship
management.
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