CRM-Paper Reading

1. 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. 1 2 3 4 5 6 7 Introduction Divergent perspectives on CRM Towards a common conceptualization CRM and relationship marketing A description of the CRM process Managerial implications Concluding remarks Agenda

3. 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

4. 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

5. delineate CRM’s domain

6. CRM as a process

7. 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)

8. 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.

9. CRM as a strategy

10. 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.

11. CRM as a philosophy

12. 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 )

13. CRM as a capability

14. 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 • Capabilitiesare the main source of its competitive advantage

15. 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

16. CRM as a technology

17. What is the CRM technology • Few marketers would nowargue that CRM is simply a technological tool that enablesfirms to build customer relationships. • ‘‘CRM is much more than technology’’ • It responsiblefor the failure of numerous CRM initiatives

18. The role of technology in CRM efforts • Technology seamlessly linking front and backoffice 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 .

19. Example

21. Process Input Output 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 ? ?

22. Towards a common conceptualization

23. 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”.

24. 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)

25. 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”.

26. 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.

27. 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.

28. 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.

29. 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.

30. The Customer Relationship Management Process Customer Evaluation and Prioritization Interaction Quality-Consistency-Relevancy-Appropriateness Core BenefitsExchange Knowledge Management Process Data collection Intelligence Generation IntelligenceDissemination InformationExchange SocialExchange Interaction Management Process

31. 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： • Desirability of prospects, • Customers defection intentions, • Needs and performances of customers, • Likely profitability of current prospective customers, • Emergence of market threats

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

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

34. 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.

35. 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： • Core product, • Information exchange, • Social exchange, • Interactions quality is determined by the collective consistency, relevancy, and appropriateness.

36. The Customer Relationship Management Process Core BenefitsExchange Knowledge Management Process Data collection Intelligence Generation IntelligenceDissemination InformationExchange SocialExchange

37. 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.

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

39. 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 ofbuyer-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.

40. 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

41. 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.

42. The Customer Relationship Management Process Customer Evaluation and Prioritization Interaction Quality-Consistency-Relevancy-Appropriateness Core BenefitsExchange Knowledge Management Process Data collection Intelligence Generation IntelligenceDissemination InformationExchange SocialExchange Interaction Management Process

43. 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.

44. 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

45. 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.

46. 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

47. 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.

48. 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

49. 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.

50. 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.