CRM-Paper Reading

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CRM-Paper Reading
An evaluation of divergent perspectives on
Customer Relationship management Towards a
common Understanding of an emerging phenomenon

• 937818 ??? 937808 ???
• 943824 ??? 943826 ???
• 943831 ??? 943842 ???

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Contents
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Introduction

• The growing body of literature on CRM is somewhat
  inconsistent and highly fragmented. This is due
  to the fact that a common conceptualization of
  the phenomenon is still lacking.
• Delineate CRMs domain
• Present the proposed conceptualization
• Introduce the key dimensions of CRM
• Present a framework for CRM success

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Introduction

• The paper concludes with some brief remarks that
  highlight the key contributions stemming from
  this effort.
• Overall, the literature review yielded
  approximately 45 distinct definitions of CRM. The
  analysis revealed that the definitions advance
  five major perspectives.
• process
• strategy
• philosophy
• capability
• technological tool

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• delineate CRMs domain

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CRM as a process

• CRM success is contingent upon a firms ability
  to detect and respond to evolving customer needs
  and preferences.
• Define CRM as a macro level (i.e., highly
  aggregated) process that subsumes numerous sub
  processes, such as prospect identification and
  customer knowledge creation.

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CRM as a process

• CRM has been defined at two different levels of
  aggregation. higher level process includes all
  activities that firms undertake in their quest to
  build durable, profitable, mutually beneficial
  customer relationships.
• Concerned with managing customer interactions for
  the purpose of promoting the establishment and
  maintenance of long-term, profitable
  relationships.

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CRM as a strategy

• The strategic view of CRM emphasizes that
  resources destined for relationship building and
  maintenance efforts should be allocated based on
  customers' lifetime value to the firm.
• With this view of CRM is the notion that customer
  relationships should be treated as a portfolio of
  assets or investments that need to be actively
  managed to maximize profitability.

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• CRM as a capability

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Distinguishes between resources and capabilities

• Resources include factors of production
• Capabilitiesthe capacity for a team of resources
  to perform some task or activity.
• Capabilities are typically knowledge-based,
  complex, and cannot simply be purchased or
  acquired in factor markets
• Capabilities refer to the hard-to-imitate skills
  and accumulated knowledge that enable firms to
  perform the activities that form part of business
  processes
• Resources are the source of a firms
  capabilities, capabilities are the main source of
  its competitive advantage

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The capability perspective on CRM

• Firms must invest in developing and acquiring a
  mix of resources that enables them to modify
  their behavior towards individual customers or
  groups of customers on a continual basis
• Effective CRM
• a firm should be capable of
• gathering intelligence about its current and
  prospective customers

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The capability perspective on CRM (Cont.)

• applying that intelligence to shape its
  subsequent interactions with them
• A potential source of competitive advantage
• It requires an indeterminate, hard-to-imitate mix
  of resources

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• CRM as a technology

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What is the CRM technology

• Few marketers would now argue that CRM is simply
  a technological tool that enables firms to build
  customer relationships.
• CRM is much more than technology
• It responsible for the failure of numerous CRM
  initiatives

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The role of technology in CRM efforts

• Technology seamlessly linking front and back
  office functions to provide for the efficient and
  effective management of interactions across
  different customer touch-points
• CRM tools enable firms to harness the power of
  database, data mining, and interactive
  technologies to collect and store unprecedented
  amounts of customer data

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Towards a common conceptualization

• Macroprocess view provides the best conceptual
  foundation for the CRM phenomenon.
• Macroprocess perspective offers the most
  comprehensive, inclusive view of CRM

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Towards a common conceptualization
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Conceptualization of CRM

• CRM is an ongoing process that involves the
  development and leveraging of market intelligence
  for the purpose of building and maintaining a
  profit-maximizing portfolio of customer
  relationships.

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CRM and relationship marketing

• Perspectives of relationship marketing
• 1. Berry(1983), he defined relationship marketing
  as attracting, maintaining and-in multiservice
  organizations-enhancing customer relationships.
  (a process-based perspective)
• 2. Morgan and Hunt(1994), who defined the
  phenomenon as all marketing activities directed
  toward establishing, developing, and maintaining
  successful relational exchanges.
• (a process-based perspective)

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CRM and relationship marketing

• 3. Parvatiyar and Sheth(2000), who defined
  relationship marketing as the ongoing process of
  engaging in cooperative and collaborative
  activities and programs with immediate and
  end-user customers to create or enhance mutual
  economic value at reduced cost. (a process-based
  perspective)
• 4. Berry(2002) suggests that relationship
  marketing can also be viewed as a philosophy. He
  states that a philosophy, not just a strategy, a
  way of thinking about customers, marketing and
  value creation not just a set of techniques,
  tools, and tactics.

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CRM and relationship marketing

• The three process-based perspectives appear to
  suggest that relationship marketing is concerned
  with the organizational activities needed to
  establish, develop, and enhance relational
  exchanges.

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CRM and relationship marketing

• CRM vs. Relationship marketing
• 1. CRM is concerned with the development and
  maintenance of a portfolio of profit-maximizing
  customer relationship that is likely to include
  exchange relationship that vary along the
  transactional-relational continuum.
• 2. CRM is a strategically oriented process
  concerned with producing an ideal mix of
  customer relationships, while relationship
  marketing focuses only on the tasks needed to
  build and sustain relational exchanges.

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CRM and relationship marketing

• 3. Although relationship marketing and CRM are
  both concerned with relationship development and
  maintenance activities, crucial differences
  regarding the intended process output.
  (collaborative exchange relationships vs.
  profit-maximizing of customer relationships)
• 4. If relationship marketing is viewed as an
  organizing philosophy that emphasizes customer
  retention, then, CRM can be thought to represent
  the organizational implementation of such a
  philosophy (Ryals Knox, 2001 Ryals
  Payne,2001).
• Whether relationship marketing is viewed as a
  process or philosophy, it appears that CRM is a
  distinct phenomenon that warrants consideration
  in the literature.

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A description of the CRM process

• Proposed conceptualization CRM is concerned
  with creation of market intelligence that firm
  can leverage to build and sustain a
  profit-maximizing portfolio of customer
  relationships.
• Market intelligence is generated through the
  effective execution of an knowledge management
  process. (Campbell,2003 Crosby Johnson, 2001a
  Fahey et al., 2001Massey et al.,2001
  Plakoyioannaki Tzokas,2002 Stefanou
  Sarmaniotis, 2003)
• Knowledge and interaction management are the
  major subprocesses of the CRM macrolevel process.

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Knowledge management

• KnowledgeA justified belief that increases an
  entitys capacity for effective action. (Alavi
  Leidner, 2001)
• Literature suggest firms need to develop
  knowledge stores related to
• Desirability of prospects,
• Customers defection intentions,
• Needs and performances of customers,
• Likely profitability of current prospective
  customers,
• Emergence of market threats

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The Customer Relationship Management Process

Knowledge Management Process
Data collection
Intelligence Generation
IntelligenceDissemination
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The Customer Relationship Management Process

Knowledge Management Process
Data collection
Intelligence Generation
IntelligenceDissemination
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Interaction management

• InteractionAn interaction refers to any
  instance in which two active parties, which have
  the ability to exert influence upon each other,
  engage in the exchange of value .(Cunningham,
  1980 Ford,1980 Kotler,1972 Turnbull et al.,
  1996)
• The Literature increasingly stress on the
  importance of buyer-seller interaction.

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Interaction management

• The interaction process management leverages
  available intelligence to build and strengthen
  customer relationships by enhancing the quality
  of individual exchange episodes.
• The intelligence is utilized in either
• The exchange of product and service for money,
• Information exchange,
• Social exchange,
• Regardless of the special purpose and/or nature
  of exchange, interactions should remain
  consistent, relevant, and appropriate.(Khirallah,2
  000 Rangins Greco, 2003)

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The Customer Relationship Management Process

Core BenefitsExchange
Knowledge Management Process
Data collection
Intelligence Generation
IntelligenceDissemination
InformationExchange
SocialExchange
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Customer Evaluation and Prioritization

• Customer evaluation involves making an informed
  assessment of the current state of the
  relationship.
• In the contrast, prioritization is concerned with
  making a determination of the relative importance
  of individual customer relationships to allocate
  organizational resources accordingly.
  (Fairhurst,2001)

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The Customer Relationship Management Process
Customer Evaluation and Prioritization

Core BenefitsExchange
Knowledge Management Process
Data collection
Intelligence Generation
IntelligenceDissemination
InformationExchange
SocialExchange
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Interaction Consistency

• Consistency refers to the extent to which an
  interaction varies from and builds upon the
  preceding stream of buyer-seller interactions.
• More over, consistent interactions are
  characterized by a cumulative understanding of
  buyer-seller relationship, regardless of how or
  with whom.

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Interaction Relevancy

• Relevancy refers to the degree to which an
  interaction creates value within the context of a
  buyer-seller relationship.
• Value is defined as the buyers perception of the
  net bundle of economic and psychological benefits
  gained from engaging in a particular exchange
  relationship (Anderson Narus,1998 Park
  Kim,2003 Ulaga, 2001,2003 Ulaga Eggert, 2003 )

Benefit gained(knowledge about new service)
Associated cost(time in reading the information)
Customer perspective
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Interaction Appropriateness

• Appropriateness refers to the extent to which an
  interaction maximizes both customer value and the
  long-term return on organizational resource
  investment.
• Providing the right customers with the right
  products and service.

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The Customer Relationship Management Process
Customer Evaluation and Prioritization
Interaction Quality-Consistency-Rele
vancy-Appropriateness
Core BenefitsExchange
Knowledge Management Process
Data collection
Intelligence Generation
IntelligenceDissemination
InformationExchange
SocialExchange
Interaction Management Process
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Managerial Implication

• Outline a basic framework that identifies the key
  steps towards CRM success.
• CRM success is defined as a firms ability to
  build and sustain a profit-maximizing portfolio
  of customer relationship.

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A framework for achieving CRM success
Specify Relationship Management
Strategy -Customer value -Firm profitability
Define CRM Processes and Assign Process Roles
Assess the State of the CRM Capabilities -Knowledg
e management capabilities -Interaction management
capabilities
Enhance Existing Capabilities -Business
processes -Roles -Technologies
Monitor, Evaluate and Improve
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Step1 Specify Relationship Management Strategy

• The strategy should specify how a firm plans to
  build durable relationships with customers who
  value different things and differ in terms of
  their profitability to the firm.
• The goal is to articulate a strategy that enables
  firms to form mutually beneficial relationship
  with their customers.

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Step1 cont.

• Firms must have a profound understanding of the
  types of customers that they serve, what they
  value, and how they differ from each other and
  who do not form part of target market.

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Step2 Define CRM Processes and Assign Process
Roles

• Providing a detail mapping, description of the
  relevant processes and subprocesses, as well as
  an allocation of responsibilities for process
  activities among individuals and groups.
• The objective is to ensure CRM processes are well
  defined and members of the organization have a
  clear understanding of what they are expected to
  do.

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Step3 Assess the State of the CRM Capabilities

• To ensure that they have the requisite resources
  to effectively execute the activities related to
  each of CRM process
• CRM capabilities refer to the mix of human,
  physical and organizational resources that
  enables firms to execute the knowledge and
  interaction management.

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Step4 Enhance Existing Capabilities

• Firms can proceed to make enhancement as
  necessary.
• Ex New technologies might have to be adopted
  and process roles might need to be respecified.

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Step5 Monitor, Evaluate and Improve

• 1)The relative efficiency with which resources
  destined for acquisition and retention efforts
  are deployed
• 2)the quality of relationships in the customer
  portfolio
• 3)the number of cross and up-selling
  opportunities that are generated
• 4)the share of customers business that the firm
  is able to capture.

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Some important issues

• Manager must really consider if their customers
  are interested in being managed.
• Manager need to focus on directing and
  coordinating cross-functional activities.
• Firms need to develop capabilities related to the
  knowledge and interaction management.
• The customer might be changed over time, the
  strategies to customers are also likely to change
  as the relationship through the lifecycle.

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Concluding remarks

• This paper puts forth a conceptualization that
  attempts to not only outline CRMs domain but
  also to reconcile the divergent perspectives
  found in academic and popular literature.
• CRM was described in terms of its two key sub
  processes knowledge and interaction management.

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Concluding remarks

• Three criteria were advanced that can be utilized
  to assess the quality of buyer-seller
  interactions-consistency, relevancy, and
  appropriateness.
• The framework builds upon the view of CRM
  presented within the paper and is intended to
  provide managers with a broad outline as to how
  CRM initiatives should be approached.

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Concluding remarks

• The framework builds on the proposed
  conceptualization and emphasizes the need for a
  posed conceptualization and emphasizes the need
  for a formal relationship management strategy
  within a CRM Program.

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Thank You !