Much case study material adds further weight to an experience-packed text, showing major benefits that can be gained by effective CRM.

Transcription

1 Handbook of CRM: Achieving Excellence in Customer Management Adrian Payne Elsevier 2006 ISBN: , 438 pages Theme of the Book This highly usable book: gives the reader a strong understanding of the vital importance of CRM for every organisation today facilitates the journey towards clear, strategic organisation-specific CRM thinking provides many tools and templates to help senior marketing and business strategy professionals embark confidently on the development and delivery of marketing programmes with successful CRM. Much case study material adds further weight to an experience-packed text, showing major benefits that can be gained by effective CRM. In this abstract you will learn that successful CRM is strategically led, processdriven, business oriented and results-focused. Its emphasis is on Strategy, not more tactics Customers, not companies Process, not software Outcomes, not outputs Long-term, not short-term, views.

2 Key Learning Points The full potential of CRM for an organization will only be realised by addressing CRM from a strategic perspective as a holistic strategic approach to managing and enhancing targeted customer relationships in order to create shareholder value not from a tactical or technological point of view. Breaking CRM down into cross-functional manageable processes makes it possible to communicate the underlying strategic principles of CRM, demonstrate the interdependence of CRM activities and plan CRM activity systematically and on a well-integrated basis. Most organisations need to work on five key cross-functional CRM processes: strategy development, value creation, multi-channel integration, information management and performance assessment. Cross-functional processes and approaches to marketing require an organisational culture that encourages collaboration and cooperation, and various forms of integration are essential in achieving successful CRM. Avoid over-emphasis on acquiring new customers at the expense of developing better relationships with existing customers; the latter are likely to be far more valuable. The quality of a company s service is only as high as the weakest link in their supply channel offer. Consistently high standard of service and customer experience must be upheld in and across all channels. The adoption of best practice throughout the organisation and supply chain partner organisations, with strong leadership, is key to a positive outcome. No amount of IT can compensate for the requirement of human investment and workforce commitment. Knowledge Interchange Book Summaries Page 2

3 A Strategic Framework for CRM CRM has emerged as a critical business issue and a management approach as a consequence of a number of trends: - marketing on the basis of relationships - viewing customers as business assets - organising in terms of processes - moving from reactive to proactive use of information - deploying IT to maximise the value of information - balancing the value trade-off between delivering and extracting customer value - developing one-to-one marketing approaches. - It is based on the principles of relationship marketing, which seeks to manage the interests of customers, staff, shareholders and other stakeholders by making these competing interests more visible and therefore more likely to be managed effectively. Service, requiring customer input and involvement, is more difficult to imitate Knowledge Interchange Book Summaries Page 3

4 than a product, so that exceptional service provided on a consistent and distinctive basis is the key success differentiator in today s highly competitive fast-changing global marketplace. The first important stage towards exceptional service via the acceptance and practice of CRM is a clearly written, broad strategic and organisationspecific definition of CRM, for communication to and use by everyone in the organisation. The Strategy Development Process What is our present position within our industry and what position do we want to achieve in the future? Who are the customers that we want and how should we segment them? Alignment and integration of business strategy and customer strategy should be a high priority, especially where they are developed within different functions of the business. Business and customer strategy must be the major components of CRM strategy because to be successful, CRM must actively reflect and reinforce the wider goals of the business. Start the CRM strategy development process with a full review of the organisation s business strategy and then of its customer strategy, including examination and analysis of the existing and potential customer base and determination of the most appropriate customer segments to serve. Three frameworks can help in assessing the business and competitive environment in order to develop an improved business strategy: the industry analysis model the generic strategies framework the market leaders framework Customer strategy taking the business strategy and identifying which customer the enterprise needs to focus on is concerned with which customer segments to serve and what products and services to sell to them. Knowledge Interchange Book Summaries Page 4

5 Most enterprises now recognise that their future depends on the strength of their business relationships, and most crucially, their relationships with customers. A business strategy based on customer intimacy is particularly appropriate to the underlying principles and ethos of CRM. The CRM Strategy Matrix The CRM strategy matrix Low Moderate High Degree of customer individualization This CRM strategy matrix provides a tool for considering a company s present and future circumstances. The CRM strategy option adopted should not be static; the aim should be for movement in the most appropriate direction often towards top right. A case study of RS Components shows the advantages this company has gained from shifting focus towards individualised CRM, doing so with a new e- channel and integration of multiple channels. Knowledge Interchange Book Summaries Page 5

6 The Value Creation Process How should we create and deliver value for our customers? How should we maximise the lifetime value of the customers we want? It is somewhat surprising that most companies focus on identifying the profitability of products rather than customers, when it is customers who generate profits, not products. In this process the outputs of the strategy development process are transformed into programmes to extract value and deliver value. The three elements to this are: - determining what value the company can provide for its customers - determining what value the company can extract from its customers - by successfully managing this value exchange, maximising the lifetime value of desirable customer segments. Products and services, relationships and branding can all be used to create customer value, and can be used in a formal value proposition. The Multi-Channel Integration Process What are the best ways for us to get to customers and for customers to get to us? What does a perfect or outstanding customer experience, deliverable at an affordable cost, look like? CRM success will depend heavily on the organization s ability to gather and deploy customer knowledge from the channels used as well as from other sources. Channels need to be considered in context of the whole interaction over the life-time of a customer relationship, not just in terms of sales activity, and customer understanding needs to go beyond traditional market research. A multi-channel strategy offers greater scope for respecting customers channel preferences and propensities of use, therefore enhancing the company s attractiveness and, ultimately, responsiveness to customers. Knowledge Interchange Book Summaries Page 6

7 Understanding the nature of different customer encounters within a multichannel environment, and the costs associated with each stage of the relationship life-cycle as well as the likely margins delivered by customers at each stage of it, is essential if the organisation s CRM activities are to be fully effective. Determining the most appropriate forms of channel options for specific customer segments is also critical. Crucially, a market-driven approach should determine channel choice, mediated by the relative economics of different options from both the customer s and the organisation s perspectives. A 6-question checklist can help considerations of an organisation s strategic channel decisions: What role should channels play in a firm s overall objectives and strategies? What role should channels play in the marketing mix? How should the firm s marketing channels be designed to achieve its distribution objectives? What kinds of channel members should be selected to meet the firm s distribution objectives? How can the external marketing channel and partners be managed to implement the firm s channel design effectively and efficiently on a continuing basis? How can channel member performance be evaluated? Mapping customer activity cycles will help towards understanding of where opportunities lie to create further value. Key activities in building a multi-channel strategy include: developing strategic multi-channel objectives understanding the needs and concerns of key customer segments undertaking a strategic review of industry structure and channel options understanding shifts in channel usage patterns reviewing channel economics developing an integrated channel management strategy. To succeed, the company must consistently seek to offer an individualised relationship, where economically feasible, in every customer interaction through whatever channel is being used, and aim to become a trusted supplier of highly delighted customers in an extended relationship. The customer s experience is likely to be formed through use of different types of Knowledge Interchange Book Summaries Page 7

8 channel; consistency across channels is critically important. The benefits of offering superior customer value to the customer are increased levels of customer retention and profitability, and a potential decrease in customer sensitivity to price. The case study on Lands End shows how bringing two communication channels together has led to more of the customer s needs being met and thus to creating greater value for the customer. Touch-points or customer interactions with the supplier in multiple channels represent the most crucial opportunities to leverage advantage. Technology can help enormously in improving touch-points. Learning more about the customers and their responses to certain communications can provide an informed basis for models for educated projections which can help in evaluating alternative communications programmes and their probable ROIs.... ironically those companies that achieve high ratings in terms of the customer experience, both within a channel and across channels, often do not have superior or proprietary technology. Rather they typically achieve their superiority by how they utilize the technology solution and through the quality of staff at the customer interface. A TNT Express Services case study shows how using the concept of the perfect customer experience to ensure all employees have a deep knowledge of customer needs, operate in an aligned manner across functions in all customer encounters and deliver superior customer service can bring major benefit all round. The Information Management Process How should we organize information on customers? How can we replicate the mind of customers and use this information to improve our CRM activities? Knowledge Interchange Book Summaries Page 8

9 Consider the information management process in two stages: reviewing the CRM strategy (or relevant component of it) in context of the organisation s information management needs; determining the technological options needed to implement the agreed strategy. CRM as a company-wide strategy requires the integration of customer interactions across all communications channels, front-office and back-office applications and business functions. With growing diversity of customer channels, what is increasingly essential to manage this integration on an ongoing basis is a purposefully designed system to bring together data, computers, procedure and people the output of the information management process. It will probably be necessary, especially in larger organisations, to combine these technologies creatively, as part of the movement towards the top right hand corner of the CRM Strategy Matrix. Keep the technological aspects of CRM in perspective as the means, not the end. Think successful corner shop as an underlying principle. There, a working memory of customers, supported by two-way dialogues, is what enabled effective customer relationship management. Today the IT infrastructure should create a nerve centre integrating disparate customer data and enabling its use towards better understanding of customers and thus enhancement of the quality of the customer experience. The Performance Assessment Process How can we create increased profits and shareholder value? How should we set standards, develop metrics, measure our results and improve our performance? Functionally separated performance measurement systems are not appropriate for CRM; various tools and approaches are however available to help. The important thing is for each organisation to develop its own composite set of measures, based on its own success maps, to ensure that its strategic aims in terms of CRM are being delivered, and to establish a basis Knowledge Interchange Book Summaries Page 9

10 for future improvement. Performance monitoring gives a more detailed inspection, while shareholder results provide an overview of the overall relationships that are driving performance. Case study material on Sears, Roebuck and Company shows how the company developed its own success map and went on to make changes that revolutionised its activities and results. To achieve the ultimate objective of CRM the delivery of shareholder results through an increase in shareholder value the organisation must understand the key drivers of shareholder results: building employee value building customer value building shareholder value reducing costs. Organizing for CRM Implementation In organising for CRM implementation, four elements are critical to success: CRM readiness assessment CRM change management CRM project management and employee engagement Issues relating to CRM budgeting. CRM readiness assessment involves an assessment of overall CRM maturity relative to other companies, and of potential barriers to CRM, and a CRM readiness audit. Using the McKinsey Seven S framework can help greatly in planning CRM change management initiatives. This framework encourages a structured, across-the-board look at the company s readiness for change and how best to approach it. Cross-functional project teams can provide the flexibility needed for adaptation amid constant change. They are also more likely to consider all the aspects needed for development of CRM and its associated budget. Knowledge Interchange Book Summaries Page 10

11 Case studies on Nationwide and Mercedes-Benz show many of the practices recommended in this book having been successfully adopted by the respective companies, both with strong emphasis on elements of employee (and in the latter case intermediary) involvement. Author ADRIAN PAYNE is a Professor of Services and Relationship Marketing at Cranfield School of Management. He has practical experience in marketing, market research, corporate planning and general management. He is an authority on Relationship Marketing and Customer Relationship Management and is an author of eight books on these topics. His research interests are in Customer Retention Economics; the impact of IT on CRM and Marketing Strategy and Planning in Service Businesses. Knowledge Interchange Book Summaries Page 11

12 Produced by the Learning Services Team Cranfield School of Management Cranfield University 2007