Strategic CRM

Developing a CRM Strategy

(Lesson 5)

Maduka Udunuwara
Department of Marketing
Faculty of Management and Finance
University of Colombo
Objectives
• Discuss the elements in a CRM strategy and steps in implementing a
CRM strategy
• Identify how to deepen knowledge about customers actively and then
use this knowledge to shape the interactions between a company and
its customers and maximize the lifetime value of customers for the
company
Perspectives of CRM
There are three perspectives of CRM:
• Functional level
• Customer facing level
• Company-wide level
 Definition of CRM from a strategic
perspective

CRM is the strategic process of selecting customers that a firm can

most profitably serve and shaping interactions between a company and
these customers. The ultimate goal is to optimize the current and
future value of customers for the company
Elements of a CRM strategy
1. CRM vision
2. Culture of customer orientation
3. Alignment of organizational processes
4. Data and technology support
5. CRM implementation
CRM Vision
• Any initiative around CRM should be based on a clear vision of what the company aims to
achieve with their customer relationship management efforts.
• Therefore, an essential component of the CRM vision should focus on the customer
value.
• a key part of the vision should focus on the topic of value. In fact, building on the concept
of customer value, we can infer that the CRM vision is to build an organization in a
manner that all actions are geared towards maximizing the lifetime value of each
customer to the firm.
• This involves acquiring and retaining strategically important customers and develop,
communicate, and deliver value propositions that meet or exceed customer expectations.
• With this vision, an organization can focus on developing the key asset of the enterprise
that matters in the long term, progressively deeper relationships with valuable customers
(Edeling & Fischer, 2016; Srivastava, Shervani, & Fahey, 1998).
Culture of customer orientation
• Customer orientation is the set of organizational values, beliefs, and
strategic actions that enable the implementation of customer
management principles.
• It is characterized by a top management belief and commitment
where the customer is the center of all activity (not the product,
geography, etc.).
• The main reason why many CRM efforts have failed is due to the lack
of commitment from top management. If top management fails to
establish a customer-oriented culture, an appropriate organizational
structural and reward system, this can result in insignificant or even
negative CRM outcomes (Chen & Popovich, 2003).
Integration and Alignment of Organizational
Processes
• In the context of strategic CRM, the integration and alignment of
organizational processes involve the organization-wide creation and
synchronization of processes, systems, and reward systems that
enable the implementation of customer management principles
(Reinartz, Krafft, & Hoyer, 2004)
• CRM works best for organizations that adopt cross-functional
processes rather than functional silos
Data and Technology Support
• Successful CRM also involves collecting and analyze complex
customer information. Thus, data and technology support plays a
central role as an enabler for effective CRM (Jayachandran et al.,
2005). Information technology has made processes more efficient,
transformed both processes and services, and supported entirely new
processes, especially in terms of online activities
• Data and technology can make customer management processes not
only more efficient but also more effective, for example by creating
new processes and channels based on online and wireless
applications
CRM Implementation
• Activities and processes that constitute both analytical and
operational CRM. They might include customer data collection,
satisfaction and loyalty metrics, customer needs analyses, relationship
economics, or segmentation for example.
• Activities and processes that constitute operational CRM, such as
value proposition management, campaign management, channel
management, referral management, and loyalty management.
• The firm’s ability to understand the value of the customer to the firm
and varied needs of different customers
Steps in Developing a CRM Strategy
1. Gain enterprise-wide commitment.
2. Build a CRM project team.
3. Analyze business requirements.
4. Define the CRM strategy.
Step 1: Gain Enterprise-Wide Commitment
• Top-down management commitment
• Bottom-up buy-in from system users
• A dedicated full-time project team
• Budget allocation for the total solution
Step 2: Build a CRM Project Team
• Management
• IT/technical personnel
• Sales, marketing, and service groups
• Financial staff
• External CRM expert
Step 3: Analyze Business Requirements
• What functions do you perform?
• What types of data do you use?
• How do you interact with customers?
• What data can be made available to help you better understand customers?
• How can you improve your communication with customers and management?
• How can you reduce administrative and scheduling requirements that detract
from the time available to build relationships?
• How involved are you in outreach activities such as telemarketing and direct mail?
• What are your reporting needs and requirements?
• How are you involved in lead tracking, lead follow-up, data transfer, and other
daily actions, and how can these processes be improved
Step 4: Define the CRM Strategy
4 (i)Value Proposition
• The goal of a CRM strategy is to retain strategically important customers, and the
objective of customer retention is to develop, communicate, and deliver value
propositions that meet or exceed customer expectations.
• The value proposition in turn is a multifaceted package of product, service, process,
price, communication, and interaction that customers experience during their
relationships with a company.
• It is the soul of the company’s business, in that it differentiates the company from
others.
• The value proposition must address three areas:
What customers value?
What the company says it offers the customers?
What the company actually offers the customers?
4(ii)Customer Strategy
• Customer understanding: To develop, communicate, and deliver a satisfactory value proposition, the
company must understand its customers’ expectations.
• Customer competitive context: The company should be aware of how its competitors are servicing
their customers and how it should retain and increase its share of customers in the competitive
marketplace
• Customer affiliation: Customer affiliation is critical because it is a primary factor affecting a
company’s ability to retain and extract greater value from the customer through cross- and up-
selling. Comparative assessments of the strength of customer affiliation affect strategies for
customer retention
• Customer management competencies: The company must have a defined standard process about
who should and how to manage customers. To retain its customer management competency, the
company also needs to benchmark its management against that of its competitors and improve it
continuously. The best way to meet customers’ expectations may be to provide them with
customized instead of generic offers. Customized offers should include not only customized products
but also services, processes, distributions, communication, and even prices
4(iii)Business Case
• The planned increase in the economic value of the customers over the
duration of their connection with the company: The lifetime value, risk
involved in unlocking that value, and growth potential by a customer segment
should be considered
• Reference and referral effects: If the company is investing more to satisfy the
needs of customers, there should be a significant impact in the form of
increased customer acquisition through referral. Thus, a value must be placed
on new customers who have been acquired as a result of the investment
• The impact of learning and innovation: The enhanced learning and innovation
resulting from CRM add more value by reducing the cost incurred by the
company through higher marketing effectiveness and improved products and
services delivered to customers
4(iv)Enterprise Transformation Plan
1.Business process:
All primary business processes should be assessed from the perspective of the customer strategy to determine
whether the distinct needs of the customer are met and, if not, how to do so.
2. Organization:
Most customer strategies result in organizational changes, which include cultural changes.
3. Location and facilities:
Particular locations that customers visit have profound impacts on their perceptions of the company, so the physical
assets of the company must be adjusted to match the customer-centric strategy.
4. Data flows:
A CRM strategy should contain a data strategy, covering all aspects from collecting data, transforming data, extracting
actionable information and finally distributing the results to different users (staff and customers).
5. Application architecture:
To implement a CRM strategy, the application architecture should be changed to feature new application software—
or at least to integrate existing software in new ways.
6. Technology infrastructure:
A CRM strategy requires a change to the technology infrastructure, including new hardware, new operating software,
and operations personnel.
4(v)Management of Other Stakeholders
• Stakeholders of a company include management, customers,
employees, and partners as well as owners/investors.
• Management initiates CRM and takes the responsibility to ensure that
in the comprehensive CRM strategy, the relationships with all
stakeholders are effectively managed.
• Because strategic CRM is a top-down approach, it succeeds only if
management is committed to the CRM strategy.