CRM-Paper Reading An evaluation of divergent perspectives on Customer Relationship management:...

CRM-Paper Reading

An evaluation of divergent perspectives on

Customer Relationship management: Towards a common Understanding

of an emerging phenomenon

Group2王祥義林庭陞謝宜君

2/50 國立清華大學工業工程與工程管理學系

Agenda

Introduction1

Divergent perspectives on CRM2

Towards a common conceptualization3

CRM and relationship marketing4

A description of the CRM process5

Managerial implications6

Concluding remarks7


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 CRM’s domain Present the proposed conceptualization Introduce the key dimensions of CRM Present a framework for CRM success


Divergent perspectives on CRM

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

delineate CRM’s domain


CRM as a process


CRM as a process

A business process refers to a group of activities that convert organizational inputs into desired outputs

Macro vs. Micro level processes

Define CRM as a macro level (i.e., highly aggregated) process that subsumes numerous sub processes, such as prospect identification and customer knowledge creation. (data collection and storage is the subprocess)


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.

Process view of CRM : buyer-seller relationships develop over time and must evolve to perdure.


CRM as a strategy


CRM as a strategy

Strategy : Overall plan for deploying resources to establish a favorable position.

Strategic view of CRM : that resources destined for relationship building and maintenance efforts should be allocated based on customers' lifetime value to firm

.Customer relationships should be treated as a portfolio

of assets or investments that need to be actively managed to maximize profitability.


CRM as a philosophy


CRM as a philosophy

The strong link exists between customer loyalty and corporate profitability.

The most effective way to achieve such loyalty is by proactively seeking to build and maintain long-term relationships with customers.

Customer-centric culture

( to focus on the importance of creating customer value )


CRM as a capability


Distinguishes between resources and capabilities

Resources: include factors of production

Capabilities:the 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 firm’s capabilities Capabilities are the main source of its competitive

advantage


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

applying that intelligence to shape its subsequent interactions with them (change its behavior towards them)

– A potential source of competitive advantage – It requires an indeterminate, hard-to-imitate mix of resources


CRM as a technology


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


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 .


Example


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

ProcessInput Output? ?


Towards a common conceptualization

Input1

(Organizational

Resource)

Philosophical

perspective

A customer-centric culture

Input2

(Physical

Resource)

Technological

perspective CRM tools

Input3 Capability

perspective

Complex and (potentially)

indeterminate mix of resources

Output

Strategic

perspective

A profit-maximizing portfolio

of customer relationships.


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”.


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)



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”.



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.



CRM vs. Relationship marketing1. 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.



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.


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., 2001;Massey et al.,2001; Plakoyioannaki & Tzokas,2002 Stefanou & Sarmaniotis, 2003)

Knowledge and interaction management are the major subprocesses of the CRM macrolevel process.


Interaction Quality-Consistency-Relevancy-Appropriateness

The Customer Relationship Management Process

Data collectionIntelligence Generation

IntelligenceDissemination

Customer Evaluation and Prioritization

Core BenefitsExchange

InformationExchange

SocialExchange

Knowledge Management Process

Interaction Management Process


Knowledge management

Knowledge ：“ A justified belief that increases an entity’s capacity for effective action”. (Alavi & Leidner, 2001)

Literature suggest firms need to develop knowledge stores related to ：

1. Desirability of prospects,2. Customers defection intentions,3. Needs and performances of customers,4. Likely profitability of current prospective customers,5. Emergence of market threats


Interaction management

Interaction：“ An 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”

The Literature increasingly stress on the importance of buyer-seller interaction.


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 ：1. Core product,2. Information exchange, 3. Social exchange,

Interactions quality is determined by the collective consistency, relevancy, and appropriateness.






InformationExchange

SocialExchange




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.







InformationExchange

SocialExchange



Interaction Consistency

Consistency refers to the extent to which an interaction varies from and builds upon the preceding stream of buyer-seller interactions.

Moreover, consistent interactions are characterized by a cumulative understanding of buyer-seller relationship, regardless of how or with whom.

Interaction consistency represents:1) Key factors lead to desirable relationship.2) A signal of suppliers’ commitment to a relationship.3) Enhancing the effectiveness of the sales process.


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

Benefit gained(knowledge about

new service)

Associated cost(time in reading the information)

Customer perspective


Interaction Appropriateness

Appropriateness refers to the extent to which an interaction maximizes both customer value and the long-term return on organizational resource investment.

EX: a call from customer to increase both traffic on their website and their sever capacity within 24 hrs.

Providing the “right” customers with the “right”

products and service.


Interaction Quality-Consistency-Relevancy-Appropriateness






InformationExchange

SocialExchange


Interaction Management Process


Managerial Implication

Outline a basic framework that identifies the key steps towards CRM success.

CRM success is defined as a firm’s ability to build and sustain a profit-maximizing portfolio of customer relationship.


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

-Knowledge management capabilities

-Interaction management capabilities

Enhance Existing Capabilities

-Business processes

-Roles

-Technologies

Monitor, Evaluate and Improve


Step1: Specify Relationship Management Strategy

1) Prioritize relationship & allocate resources 2) dealing with customer belonging to different

priority levels. EX: three tiers/after-sale

3) The goal is that enables firms to form mutually beneficial relationship with their customers.

4) Firms must have a profound understanding of the types of customers that they serve, what they value, and how they differ from each other.




-Customer value

-Firm profitability






-Business processes

-Roles

-Technologies



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 :

1) members of the organization have a clear understanding of what they are expected to do.

2) manager can specify interfunctional dynsmics.




-Customer value

-Firm profitability






-Business processes

-Roles

-Technologies



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.


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.

Ensuring the appropriate mix of resources is available to execute the CRM process.




-Customer value

-Firm profitability






-Business processes

-Roles

-Technologies



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 customer’s business that the firm is able to capture.


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.


Concluding remarks

This paper puts forth a conceptualization that attempts to not only outline CRM’s 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.


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.

CRM-Paper Reading An evaluation of divergent perspectives on Customer Relationship management:...

Documents

Transcript of CRM-Paper Reading An evaluation of divergent perspectives on Customer Relationship management:...