Thursday, April 27, 2017

A Strategic Framework of CRM

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
 Source: Adapted from Payne and Frow, 2005.
     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.  

REFERENCES

Aurik, J., Fabel, M., & Jonk, G. (2015). The future of strategy: a transformative approach to strategy for a world that won’t stand still. McGraw Hill Professional.

Gummesson, E. (2002). Practical value of adequate marketing management theory. European Journal of Marketing, 36 (March), 325–49.

Levitt, T. (1969). The marketing mode: pathways to corporate growth. New York: McGraw-Hill.

Greenberg, P. (2001). CRM at the speed of light. Berkeley, CA: Osborne/McGraw-Hill.

Kaplan, R., & Norton. D. (1996), The balanced scorecard: translating strategy into action. Boston: Harvard Business School Press.

Payne, A., & Frow, P. (2005). A strategic framework for customer relationship management. Journal of Marketing, 69(4), 167–176.

Pearlson, K., & Saunders, C. S. (2004). Managing and using information systems: A strategic approach. New York, NY: Wiley.

Porter, M. (1996). Hbr's 10 must reads on strategy. Retrieved January 05, 2017 from
https://sites.google.com/site/zrfapaw/HBRs-10-Must-Reads-on-Strategy

Reichheld,F., & Sasser , E. (1990). Zero defections: quality comes to services. Harvard Business Review, 68 (September–October), 105–111.
Ryals, L., & Payne. A. (2001). Customer relationship management in financial services: towards information enabled relationship marketing. Journal of Strategic Marketing, 9 (March), 1–25.

Salesforce (2017). Sales process map. Retrieved April 11, 2017 from www.salesfroce.com.

Wailgum, T. (2007). CRM definition and solution. Retrieved April 04, 2017 from http://www.cio.com/article/2439505/customer-relationship-management/crm-definition-and-solutions.html

Wagner, T. (2000). Multichannel customer interaction in defying the limits. San Francisco: Montgomery Research, 277–80.





















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