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Customer Relationship Management: From Strategy To Implementation

Adrian Payne, Pennie Frow, Cranfield School of Management, UK

Abstract

This paper examines Customer Relationship Management, or CRM, from the perspective of

both strategy formulation and implementation. We commence by briefly reviewing theorigins and role of CRM and highlighting the importance of adopting a cross-functional

approach to CRM strategy formulation. We review alternative approaches to CRM strategy

development and, using an ‘interaction research’ approach, propose a model that addresses

both CRM strategy and implementation. We identify four critical implementation components

of a successful CRM programme and examine these in the context of five key cross-

functional CRM processes.

Keywords: CRM, customer relationship management, relationship marketing

Introduction

The purpose of CRM is to efficiently and effectively increase the acquisition, growth and

retention of profitable customers by selectively initiating, building and maintaining

appropriate relationships with them. Developments in information technology can help

improve customer relationships and make it possible to gather vast amounts of customer data

and to analyze, interpret and utilize it constructively. However, there is often a gap between

an organisation’s CRM vision and the results it obtains. The purpose of this paper is to

propose an integrated model of CRM strategy and implementation that can help organizationsrealize their CRM vision more effectively. Specifically, the objectives of this paper are to: (1)

briefly review the evolution of CRM and emphasise a cross-functional approach to CRM; (2)

review the development of alternative approaches to CRM strategy development;(3) propose

a model for both CRM strategy and implementation; (4) discuss initial experience of using the

model in companies.

The Origins and Evolution of CRM

CRM is based on the principles of relationship marketing (RM) which is regarded as one of

the key areas of modern marketing and has generated great research interest (Sheth 2000).We view RM as a paradigmatic shift in marketing (e.g. Grönroos, 1997; Gummesson, 1997;

Parvatiyar and Sheth, 1997). The increased interest in ‘one to one’ marketing (Peppers andRogers, 1993) raised the potential for shifting from a mass to individualized or ‘one-to-one’

marketing. Relationship-based approaches have been increasingly advocated over the last

fifteen years (e.g., Grönroos, 1994; Gummesson, 2002b; Webster, 2002; Vargo and Lusch,

2004). With its roots in RM, CRM is a relatively new management discipline. Parvitiyar and

Sheth (2001) point out the two terms are often used interchangeably. Contributors to this

literature emphasize the key role of multiple stakeholders (e.g. Christopher, Payne and

Ballantyne, 1991; Kotler, 1992; Buttle 1999; Gummesson, 1999). We adopt the perspective of

Ryals and Payne (2001) who propose that RM is concerned with relationships with multiplestakeholders, while the focus of customer relationship management should be primarily on the

customer.

ANZMAC 2005 Conference: Business Interaction, Relationships and Networks 85

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In 2003, Zablah, Beuenger and Johnston observed that CRM was “for the most part neglected

in the literature and that further exploration of CRM and its related phenomena was not only

warranted, but also desperately needed. Some useful initial work has been done on the

conceptualization of CRM (e.g., Meta Group, 2001; Srivastava, Shervani and Fahey, 1999;

Sue and Morin, 2001; Winer, 2001; Zablah, Beuenger and Johnston, 2003; Payne and Frow,

2005) and on issues associated with implementation (e.g., Ebner et al., 2002; Henneberg,2003; Pettit, 2002; Rigby, Reichheld and Schefter, 2002), however much work still remains to

be done. A brief analysis of the literature on CRM systems points, historically, toimplementation problems. For example Gartner Group (2003) found some 70% of CRM

projects resulted in either losses or no bottom-line improvement. As CRM vendors have

largely driven the initial emphasis on CRM, they must be seen as at least part of the problem

with respect to the failure of many CRM systems. However, more recent work analysis

(Rigby and Ledingham, 2004) has shown companies are now reporting improved satisfaction

with their CRM investments.

In a recent review of CRM, Boulding et al. (2005) argue that the field of CRM has now begun

to converge on a common definition: “Specifically, CRM relates to strategy, managing thedual-creation or value, the intelligent use of data and technology, the acquisition of customer

knowledge and the diffusion of this knowledge to the appropriate stakeholders, the

development of appropriate (long-term) relationships with specific customers and/or customer

groups, and the integration of processes across the many areas of the firm and across the

network of firms that collaborate to generate customer value” (p. 6).Recently there has been

an increasing acknowledgement of the important of cross-functional processes in CRM – a

perspective on CRM strongly endorsed by Boulding et al. (2005). This inter-functional

coordination and customer orientation is highlighted in an increasing body of work on market

orientation (e.g. Kohli and Jaworski, 1990). However, much of the literature on CRM hasunder-emphasised its cross-functional nature and we posit this is a neglected and critical

component of CRM that should form part of any CRM strategy and implementation model.

CRM strategy and processes

Grabner-Kraeuter and Moedritscher (2002) point to the lack of an adequate CRM strategic

framework from which to define success as being a reason for the disappointing results of

many CRM initiatives. A number of authors have proposed CRM strategy frameworks. Buttle

(2001) provides a CRM value chain that identifies a series of ‘primary stages’: customer

portfolio analysis; customer intimacy; network development; value proposition development;

and manage the relationship. It also identifies a series of ‘supporting conditions’ including:culture and leadership; procurement processes; human resource management processes;

IT/data management processes; and organisation design. This is helpful as it considersimplementation issues. Sue and Morin (2001) develop a framework for CRM based on

initiatives, expected results and contributions. This framework is not process-based and, as

the authors acknowledge, many initiatives are not explicitly identified in the framework.

Winer (2001) outlines a model, which contains: a database of customer activity; analyses of

the database; decisions about customers to target; tools for customer targeting; how to build

relationships with the targeted customers; privacy issues; and metrics for measuring the

success of the CRM program. All these frameworks provide some useful insights, however

none appear to adopt an explicit cross-functional process-based conceptualization. Payne andFrow (2005) used an expert panel of executives with extensive experience within the CRM

and IT sectors to identify specific cross-functional processes. They identify five CRM

processes including: strategy development; value creation; multi-channel integration;information management; and performance assessment. This approach, used because of its


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specific cross-functional process focus, formed the basis of the process elements used in the

CRM strategy and implementation model developed in this paper.

Research Approach

This paper is part of a research programme into CRM that utilises learning from field-basedinteractions with executives together with synthesis of relevant literature. This research

approach used Gummesson’s (2002a) ‘interaction research’ methodology which is based onhis view that interaction and communication play a crucial role in the stages of research; and

that testing concepts, ideas and results through interaction with different target groups of

managers form an integral part of the research process. It also draws on approaches used in

the work on ‘contemporary marketing practices’ (Coviello, et al., 2002). This interaction

research programme utilised the following: a group of 34 experienced executives

independently selected by the director of a leading European research and development

institute specializing in the CRM and IT sectors; interviews with 20 executives working in

CRM, marketing and IT roles in companies in the financial services sector; interviews with

six executives from large CRM vendors and with five executives from three CRM andstrategy consultancies; 35 workshops with 18 CRM vendors, analysts and their clients;

piloting the framework as a planning tool in two global organisations in the financial services

and automotive sectors; and using the framework as a planning tool in two companies – in

global telecommunications and global logistics - six workshops were held in each of the latter

companies.

A CRM Strategy and Implementation Model

In this section space permits only a brief overview of the model and its development. TheCRM strategy and implementation model used ‘interaction research’ and combined field-

based interactions, involving the executives groups outlined above, with insights from the

literature to identify four key implementation areas. These components were then

incorporated into a first preliminary model. This initial model, and the development of further

versions of it, was informed and further refined by interactions with the executive groups. The

framework went through several iterations and a number of minor revisions. The model has

two main components: four key CRM implementation elements and five cross-functional

CRM processes. The final version is shown in Figure 1. It represents an organizing model for

developing and implementing CRM which is recursive, rather than linear, in that its many

activities need to be managed concurrently and some elements will need to be revisited as aconsequence of later activities. Its components are now summarised.


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Figure 1: CRM Strategy and Implementation Model

Core cross-functional processes

Figure 1 outlines the five cross-functional processes, which include:

The strategy development process: The strategy development process has a dual focus on the

organisation’s business strategy and its customer strategy. This process not only shapes the

nature of the other four key CRM processes but, more importantly, it defines the overall

objectives and parameters for the organization’s CRM activities.

The value creation process: The value creation process is concerned with transforming the

outputs of the strategy development process into programmes that both extract and deliver

and co-produce (or co-create) value.

The multi-channel integration process: The multi-channel integration process starts with the

identification of the most appropriate channel options for specific segments; and is then

concerned with creating an outstanding customer experience within and across all channels.

The information management process: The information management process is concerned

with the collection and collation of customer information from all customer contact points;

and gaining customer insight that can be used to enhance the quality of the customer

experience.

The performance assessment process: The performance assessment process ensures that the

organisation’s strategic CRM objectives are being delivered to an appropriate and standard.

Key implementation elements

Figure 1 shows the four critical implementation elements of a successful CRM programmeidentified during the interaction research. We now review these four elements - CRM

readiness assessment, CRM change management, CRM project management, and employee

engagement - that need to come together to support the organisation and implementation of a

CRM strategy.

CRM readiness assessment: A CRM readiness assessment helps the CRM sponsors and

leaders assess the overall position in terms of readiness to progress with CRM initiatives and

to identify how well developed their organisation is relative to other companies. Research has

shown that there are identifiable stages of maturity in CRM development (e.g. Ryals andPayne, 2001); with each stage representing a level of CRM maturity characterised by the

extent to which customer information is used to enhance the customer experience andcustomer-generated cash flows. If an organisation is in the early stages of CRM development,

Process 1: Strategy Development

ENABLING PROCESSES

Process 4:

Information

Management

Process 3:

Multi-Channel

Integration

Process 2:

Value

Creation

C R M C

h a n g e M a n a g e m e n t

C R M P r o j e c t M a n a g e m e n t

Process 5: Performance Assessment

CRM Readiness Assessment

Employee Engagement

Process 1: Strategy Development

ENABLING PROCESSES

Process 4:

Information

Management

Process 3:

Multi-Channel

Integration

Process 2:

Value

Creation

C R M C

h a n g e M a n a g e m e n t

C R M P r o j e c t M a n a g e m e n t

Process 5: Performance Assessment

CRM Readiness Assessment

Employee Engagement


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it may be useful to start with an overview audit to help get senior management understanding

and buy-in at an early stage. The overview form of readiness audit can be used to quickly

form an initial view on the key CRM priorities, to define the relative importance of these

priorities and to determine where effort needs to be applied. Firms that are more advanced can

consider a more comprehensive CRM audit such as one that we are currently testing as part of

our broader CRM research programme.CRM change management: To implement a large-scale and complex CRM initiative,

companies will typically have to undergo substantial organisational and cultural change. Acritical dimension of any large CRM programme, therefore, is an effective change

management programme. (We make a distinction here between change management which is

concerned with strategic organisational change and employee engagement which we view as a

more operationally-oriented set of activities. These activities are, however, closely entwined.)

There are a number of potential obstacles to this transition, not least the entrenched interest in

preserving the status quo. Understanding and acting on change management requirements is

therefore a prerequisite to successful CRM implementation. A change management

framework such as the ‘Seven S’ framework (Peters, 1984) can be a useful tool to help the

organisation identify those issues relevant to their particular context. We found lack of attention to this area a common theme in companies.

CRM project management: Whilst change management is needed for virtually all CRM

initiatives regardless of the scale of the CRM initiative, project management has increasing

relevance as the size and complexity of CRM initiatives increase. Effective CRM project

management is essential and our interviewees emphasised that CRM projects which overrun

budgets and timescales create considerable damage to CRM credibility. In our research we

identified several companies using the Benefits Dependency Network framework (e.g.

Wilson, et al. 2000); this works backwards from the project’s objectives to ensure that all

necessary business changes are made, as well as CRM technology solutions implemented.Some organisations we interviewed were adopting a large-scale and very comprehensive

approach to CRM implementation. However, others we interviewed had found that an

incremental and modular approach to CRM development or enhancement was more

appropriate. These latter companies typically engaged in a series of smaller individual CRM

projects, undertaken in an appropriate sequence, each with clearly defined objectives and ROI

outcomes. These projects varied in the emphasis placed on analytical CRM, operational CRM

and collaborative CRM.

Employee engagement: The last of the four implementation elements is the engagement of

employees to support the various initiatives that comprise the overall CRM programme.

Employees have a crucial role to play within each of the CRM processes and implementationactivities outlined in this paper. Change management and project management are particularly

dependent on engagement of employees for their success. Ensuring the delivery of a superior customer experience during times of unexpectedly high demand requires the active

engagement and commitment of all customer-facing staff and is a hallmark of a well-planned

CRM implementation. Interviewees stated that employee engagement is now receiving

greater attention as their companies place more focus on creating outstanding customer

experiences.

Discussion

This paper is a response to the call by Zablah, Beuenger and Johnston (2003) that further

exploration of CRM is desperately needed, and also our experience, during fieldwork, of the

confusion and problems that many companies experience in their efforts to implement CRM.We now briefly discuss some managerial applications of our work. Future research


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opportunities in CRM have recently been examined in some detail in a paper by Boulding et

al. (2005) so we do not repeat these here. However, first we identify some limitations to this

work. First, our research was based on large industrial companies as it is in such companies,

because of their complexity, that CRM is likely to have the greatest positive impact. Second,

we did not explore the application of CRM strategy in non-business areas such as the

government and not-for-profit sectors. Third, we have not attempted to identify highlyspecific components of CRM that may assume strategic importance in particular industry

settings. Finally, our attention was on enterprises seeking to develop strong relationships withtheir customers. There may be different aspects to be considered in companies adopting more

transactionally-oriented approaches.

Different companies, according to their specific circumstances, will have different CRM

issues they need to address. This CRM strategy and implementation model has been used in

companies in a number of ways. For example, it has been used to plan the key components of

a CRM strategy and highlight which implementation issues and processes need greatest

attention in a large UK service company. It has also been used to undertake CRM

benchmarking - a large financial services company used this model to benchmark six UScompanies considered to be world-class CRM leaders within the financial services sector. It

can also be used to help create a platform for change. In one large logistics company, this

model was used with over 100 of its senior staff in a series of workshops. Working in small

groups, managers provided a team score in terms of their perception of the company’s

existing and desired capabilities. The findings from the eighteen groups were very consistent

regarding problems; key areas for action were identified and a critical mass of executives,

who shared a common perspective, undertook responsibility for implementing a major change

management programme. Finally, the model has proved useful in helping identify very

specific problems. For example, in planning a CRM program in a large auto company, use of the model surfaced particular integration problems between business and customer strategy

and made them highly visible within the company; this led to actions being taken to address

them.


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