Customer Relationship Management (CRM) Chapter 2 The CRM Value Chain Learning 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 of departure. The model provides a ‘helicopter view’, giving an overview of the CRM landscape. The CRM value chain sets out a five-step process for developing and implementing CRM strategy. Each of the five primary steps is performed with the deployment of a number of tools and processes. These are explored in more detail later in the book. The model also identifies a number of supporting conditions that facilitate successful implementation. 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 earned from a customer relationship; for example, by selling customers additional products 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’s journey 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 of customer 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 customer relationships?

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 the CRM value chain. If the conditions are not supportive of the CRM strategy 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 data and information technology. Here, we want to examine the role of data in CRM. Our definition of CRM stresses the importance of high-quality customer data. Acquiring, storing, enhancing, maintaining, distributing and 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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