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  1. 1. Adrian Payne & Pennie Frow A Strategic Framework for Customer Relationship ManagementIn this article, the authors develop a conceptual framework for customer relationship management (CRM) thathelps broaden the understanding of CRM and its role in enhancing customer value and, as a result, shareholdervalue. The authors explore definitional aspects of CRM, and they identify three alternative perspectives of CRM.The authors emphasize the need for a cross-functional, process-oriented approach that positions CRM at a strate-gic level. They identify five key cross-functional CRM processes: a strategy development process, a value creationprocess, a multichannel integration process, an information management process, and a performance assessmentprocess. They develop a new conceptual framework based on these processes and explore the role and functionof each element in the framework. The synthesis of the diverse concepts within the literature on CRM and rela-tionship marketing into a single, process-based framework should provide deeper insight into achieving successwith CRM strategy and implementation. ver the past decade, there has been an explosion of cize the severe lack of CRM research that takes a broader,O interest in customer relationship management (CRM) by both academics and executives. How-ever, despite an increasing amount of published material, more strategic focus. The article does not explore people issues related to CRM implementation. Customer relation- ship management can fail when a limited number ofmost of which is practitioner oriented, there remains a lack employees are committed to the initiative; thus, employeeof agreement about what CRM is and how CRM strategy engagement and change management are essential issues inshould be developed. The purpose of this article is to CRM implementation. In our discussion, we emphasizedevelop a process-oriented conceptual framework that posi- such implementation and people issues as a priority area fortions CRM at a strategic level by identifying the key cross- further research.functional processes involved in the development of CRMstrategy. More specifically, the aims of this article are CRM Perspectives and Definition •To identify alternative perspectives of CRM, The term “customer relationship management” emerged in •To emphasize the importance of a strategic approach to CRM within a holistic organizational context, the information technology (IT) vendor community and •To propose five key generic cross-functional processes that practitioner community in the mid-1990s. It is often used to organizations can use to develop and deliver an effective describe technology-based customer solutions, such as sales CRM strategy, and force automation (SFA). In the academic community, the •To develop a process-based conceptual framework for CRM terms “relationship marketing” and CRM are often used strategy development and to review the role and components interchangeably (Parvatiyar and Sheth 2001). However, of each process. CRM is more commonly used in the context of technology solutions and has been described as “information-enabled We organize this article in three main parts. First, we relationship marketing” (Ryals and Payne 2001, p. 3).explore the role of CRM and identify three alternative per- Zablah, Beuenger, and Johnston (2003, p. 116) suggest thatspectives of CRM. Second, we consider the need for a CRM is “a philosophically-related offspring to relationshipcross-functional process-based approach to CRM. We marketing which is for the most part neglected in the litera-develop criteria for process selection and identify five key ture,” and they conclude that “further exploration of CRMCRM processes. Third, we propose a strategic conceptual and its related phenomena is not only warranted but alsoframework that is constructed of these five processes and desperately needed.”examine the components of each process. A significant problem that many organizations deciding The development of this framework is a response to a to adopt CRM face stems from the great deal of confusionchallenge by Reinartz, Krafft, and Hoyer (2004), who criti- about what constitutes CRM. In interviews with executives, which formed part of our research process (we describe thisAdrian Payne is Professor of Services and Relationship Marketing and process subsequently), we found a wide range of viewsDirector of the Centre for CRM (e-mail:, and about what CRM means. To some, it meant direct mail, aPennie Frow is Visiting Fellow in Marketing (e-mail: loyalty card scheme, or a database, whereas others envi-uk), Cranfield School of Management, Cranfield University. The authors sioned it as a help desk or a call center. Some said that itacknowledge the financial support of BT plc and SAS with this research, was about populating a data warehouse or undertaking dataand they thank the three anonymous JM reviewers and the consulting edi-tors for their helpful comments on previous versions of this article. mining; others considered CRM an e-commerce solution, such as the use of a personalization engine on the Internet© 2005, American Marketing Association Journal of MarketingISSN: 0022-2429 (print), 1547-7185 (electronic) 167 Vol. 69 (October 2005), 167–176
  2. 2. or a relational database for SFA. This lack of a widely (1997), Singh and Agrawal (2003), and Swift (2000). Fol-accepted and appropriate definition of CRM can contribute lowing this phase of our work, we identified Zablah,to the failure of a CRM project when an organization views Beuenger, and Johnston’s (2003) research, which supportedCRM from a limited technology perspective or undertakes our view of these perspectives.CRM on a fragmented basis. The importance of how CRM is defined is not merely The definitions and descriptions of CRM that different semantic. Its definition significantly affects the way anauthors and authorities use vary considerably, signifying a entire organization accepts and practices CRM. From avariety of CRM viewpoints. To identify alternative perspec- strategic viewpoint, CRM is not simply an IT solution thattives of CRM, we considered definitions and descriptions of is used to acquire and grow a customer base; it involves aCRM from a range of sources, which we summarize in the profound synthesis of strategic vision; a corporate under-Appendix. We excluded other, similar definitions from this standing of the nature of customer value in a multichannellist. environment; the utilization of the appropriate information An important aspect of the CRM definition that we management and CRM applications; and high-quality oper-wanted to examine was its association with technology. ations, fulfillment, and service. Thus, we propose that inThis is important because CRM technology is often incor- any organization, CRM should be positioned in the broadrectly equated with CRM (Reinartz, Krafft, and Hoyer strategic context of Perspective 3.2004), and a key reason for CRM failure is viewing CRM Swift (2000) argues, and we concur, that organizationsas a technology initiative (Kale 2004). For this reason, we will benefit from adopting a relevant strategic CRM defini-review the definitions in the Appendix with special attention tion for their firm and ensuring its consistent use throughoutto their emphasis on technology. This review suggests that their organization. Thus, we developed a definition of CRMCRM can be defined from at least three perspectives: nar- that reflected Perspective 3. We examined the CRM litera-rowly and tactically as a particular technology solution, ture, synthesized aspects of the various definitions into awide-ranging technology, and customer centric. These per- draft definition, and then tested it with practicing managers.spectives can be portrayed as a continuum (see Figure 1). As our research progressed, we went through several itera- One organization we interviewed, which spent more tions. The result is the following definition, which we usethan $30 million on IT solutions and systems integration, for the purposes of this study:described CRM solely in terms of its SFA project. At thisextreme, CRM is defined narrowly and tactically as a par- CRM is a strategic approach that is concerned with creat- ing improved shareholder value through the developmentticular technology solution (e.g., Khanna 2001). We call of appropriate relationships with key customers and cus-this CRM “Perspective 1.” Other definitions, such as that of tomer segments. CRM unites the potential of relationshipKutner and Cripps (1997), though somewhat broader, also marketing strategies and IT to create profitable, long-termfall into this category. relationships with customers and other key stakeholders. In another organization that we interviewed, the term CRM provides enhanced opportunities to use data andCRM was used to refer to a wide range of customer- information to both understand customers and cocreateoriented IT and Internet solutions, reflecting Stone and value with them. This requires a cross-functional integra-Woodcock’s (2001) definition. This represented CRM “Per- tion of processes, people, operations, and marketing capa- bilities that is enabled through information, technology,spective 2,” a point near the middle of the continuum. and applications. “Perspective 3” reflects a more strategic and holisticapproach to CRM that emphasizes the selective manage- This definition provided guidance for our subsequentment of customer relationships to create shareholder value. research considerations and the strategic and cross-This reflects elements of several previously noted defini- functional emphasis of the conceptual framework wetions of CRM, including those of Buttle (2001), Glazer developed. FIGURE 1 The CRM Continuum CRM Defined CRM Defined Narrowly Broadly and and Tactically Strategically CRM is about the CRM is the CRM is a holistic implementation of a implementation of an approach to managing specific technology integrated series of customer relationships solution project. customer-oriented to create shareholder technology solutions. value.168 / Journal of Marketing, October 2005
  3. 3. Processes: A Strategic Perspective cross-functional conceptualization of CRM. For example, Sue and Morin (2001, p. 6) outline a framework for CRMGartner (2001) calls for a fresh approach to business pro- based on initiatives, expected results, and contributions, butcesses in CRM that involves both rethinking how these pro- this is not process based, and “many initiatives are notcesses appear to the customer and reengineering them to be explicitly identified in the framework.” Winer (2001, p. 91)more customer centric. Kale (2004) supports this view and develops a “basic model, which contains a set of 7 basicargues that a critical aspect of CRM involves identifying all components: a database of customer activity; analyses ofstrategic processes that take place between an enterprise the database; given the analyses, decisions about which cus-and its customers. To address this challenge of adopting a tomers to target; tools for targeting the customers; how tofresh approach to CRM processes, we aimed to identify the build relationships with the targeted customers; privacykey generic processes relevant to CRM. issues; and metrics for measuring the success of the CRM We examined the literature to identify appropriate crite-ria for process selection but found little work in this area, program.” Again, this model, though useful, is not a cross-with the exception of the contribution by Srivastava, Sher- functional process-based conceptualization. This gap in thevani, and Fahey (1999), who establish four process selection literature suggests that there is a need for a new systematiccriteria for marketing and business processes. We chose their process-based CRM strategy framework. Synthesis of thework as a starting point for the identification of process diverse concepts in the literature on CRM and relationshipselection criteria for CRM. The criteria these authors pro- marketing into a single, process-based framework shouldpose are as follows: First, the processes should comprise a provide practical insights to help companies achieve greatersmall set that addresses tasks critical to the achievement of success with CRM strategy development and organization’s goals. Second, each process should con-tribute to the value creation process. Third, each process Interaction Researchshould be at a strategic or macro level. Fourth, the processes Conceptual frameworks and theory are typically based onneed to manifest clear interrelationships. combining previous literature, common sense, and experi- As part of our research, we conducted a workshop with ence (Eisenhardt 1989). In this research, we integrated aa panel of 34 highly experienced CRM practitioners, all of synthesis of the literature with learning from field-basedwhom had extensive experience in the CRM and IT sectors. interactions with executives to develop and refine the CRMThe director of a leading research and management institute strategy framework. In this approach, we used whatspecializing in the CRM and IT sectors selected the panel. Gummesson (2002a) terms “interaction research.” ThisParticipants were selected on the basis of the following form of research originates from his view that “interactionattributes to ensure that they were knowledgeable about and communication play a crucial role” in the stages ofCRM, its implementation, and its operation: substantial research and that testing concepts, ideas, and resultsmanagement and industrial experience (average of 17.2 through interaction with different target groups is “an inte-years), maturity (average age of 40.2 years), international gral part of the whole research process” (p. 345). Therepresentation and international experience (managers from sources for these field-based insights, which include execu-nine countries attended; most of them had international tives primarily from large enterprises in the business-to-experience), and academic qualifications (degree or equiva- business and business-to-consumer sectors, included thelent). In the first part of the workshop, which involved small following:group sessions, the panel reviewed and subsequently unani- •An expert panel of 34 highly experienced executives;mously agreed that these four criteria were fully appropriate •Interviews with 20 executives working in CRM, marketing,for selecting CRM processes. However, they also proposed and IT roles in companies in the financial services sector;two further criteria: First, each process should be cross- •Interviews with six executives from large CRM vendors andfunctional in nature, and second, each process would be with five executives from three CRM and strategyconsidered by experienced practitioners as being both logi- consultancies;cal and beneficial to understanding and developing strategic •Individual and group discussions with CRM, marketing, andCRM activities. We used these six criteria to select key IT managers at workshops with 18 CRM vendors, analysts,generic CRM processes. and their clients, including Accenture, Baan, BroadVision, Chordiant, EDS, E.piphany, Hewlett-Packard, IBM, Gartner, NCR Teradata, Peoplesoft, Oracle, SAP, SAS Institute, A Conceptual Framework for CRM Siebel, Sybase, and Unisys;Grabner-Kraeuter and Moedritscher (2002) suggest that the •Piloting the framework as a planning tool in the financial ser-absence of a strategic framework for CRM from which to vices and automotive sectors; anddefine success is one reason for the disappointing results of •Using the framework as a planning tool in two companies: global telecommunications and global logistics. Six work-many CRM initiatives. This view was supported both by the shops were held in each company.senior executives we interviewed during our research andby Gartner’s (2001) research. Our next challenges were toidentify key generic CRM processes using the previously Process Identification and the CRM Frameworkdescribed selection criteria and to develop them into a con- We began by identifying possible generic CRM processesceptual framework for CRM strategy development. from the CRM and related business literature. We then dis- Our literature review found that few CRM frameworks cussed these tentative processes interactively with theexist; those that did were not based on a process-oriented groups of executives. The outcome of this work was a short A Strategic Framework for CRM / 169
  4. 4. list of seven processes. We then used the expert panel of Strategy Development Processexperienced CRM executives who had assisted in the devel- This process requires a dual focus on the organization’sopment of the process selection schema to nominate the business strategy and its customer strategy. How well theCRM processes that they considered important and to agree two interrelate fundamentally affects the success of itson those that were the most relevant and generic. After an CRM strategy.initial group workshop, each panel member independentlycompleted a list representing his or her view of the key Business Strategygeneric processes that met the six previously agreed-onprocess criteria. The data were fed back to this group, and a The business strategy must be considered first to determinedetailed discussion followed to help confirm our under- how the customer strategy should be developed and how itstanding of the process categories. should evolve over time. The business strategy process can As a result of this interactive method, five CRM pro- commence with a review or articulation of a company’s vision, especially as it relates to CRM (e.g., Davidsoncesses that met the selection criteria were identified; all five 2002). Next, the industry and competitive environmentwere agreed on as important generic processes by more should be reviewed. Traditional industry analysis (e.g.,than two-thirds of the group in the first iteration. Subse- Porter 1980) should be augmented by more contemporaryquently, we received strong confirmation of these as key approaches (e.g., Christensen 2001; Slater and Olson 2002)generic CRM processes by several of the other groups of to include co-opetition (Brandenburger and Nalebuff 1997),managers. The resultant five generic processes were (1) the networks and deeper environmental analysis (Achrol 1997),strategy development process, (2) the value creation and the impact of disruptive technologies (Christensen andprocess, (3) the multichannel integration process, (4) the Overdorf 2000).information management process, and (5) the performanceassessment process. Customer Strategy We then incorporated these five key generic CRM pro-cesses into a preliminary conceptual framework. This initial Whereas business strategy is usually the responsibility offramework and the development of subsequent versions the chief executive officer, the board, and the strategy direc-were both informed by and further refined by our interac- tor, customer strategy is typically the responsibility of thetions with two primary executive groups: mangers from the marketing department. Although CRM requires a cross-previously noted companies and executives from three functional approach, it is often vested in functionally basedCRM consulting firms. Participants at several academic roles, including IT and marketing. When different depart-conferences on CRM and relationship marketing also ments are involved in the two areas of strategy develop- ment, special emphasis should be placed on the alignmentassisted with comments and criticisms of previous versions. and integration of business strategy.With evolving versions of the framework, we combined a Customer strategy involves examining the existing andsynthesis of relevant literature with field-based interactions potential customer base and identifying which forms of seg-involving the groups. The framework went through a con- mentation are most appropriate. As part of this process, thesiderable number of major iterations and minor revisions; organization needs to consider the level of subdivision forthe final version appears in Figure 2. customer segments, or segment granularity. This involves This conceptual framework illustrates the interactive set decisions about whether a macro, micro, or one-to-one seg-of strategic processes that commences with a detailed mentation approach is appropriate (Rubin 1997).review of an organization’s strategy (the strategy develop- Several authors emphasize the potential for shiftingment process) and concludes with an improvement in busi- from a mass market to an individualized, or one-to-one,ness results and increased share value (the performance marketing environment. Exploiting e-commerce opportuni-assessment process). The concept that competitive advan- ties and the fundamental economic characteristics of thetage stems from the creation of value for the customer and Internet can enable a much deeper level of segmentationfor the business and associated cocreation activities (the granularity than is affordable in most other channels (e.g.,value creation process) is well developed in the marketing Peppers and Rogers 1993, 1997). In summary, the strategyliterature. For large companies, CRM activity will involve development process involves a detailed assessment of busi-collecting and intelligently using customer and other rele- ness strategy and the development of an appropriate cus-vant data (the information process) to build a consistently tomer strategy. This should provide the enterprise with asuperior customer experience and enduring customer rela- clearer platform on which to develop and implement itstionships (the multichannel integration process). The itera- CRM activities.tive nature of CRM strategy development is highlighted bythe arrows between the processes in both directions in Fig-ure 2; they represent interaction and feedback loops Value Creation Processbetween the different processes. The circular arrows in the The value creation process transforms the outputs of thevalue creation process reflect the cocreation process. We strategy development process into programs that bothnow examine the key components we identified in each extract and deliver value. The three key elements of theprocess. As with our prior work, we used the interaction value creation process are (1) determining what value theresearch method in the identification of these process company can provide to its customer; (2) determining whatcomponents. value the company can receives from its customers; and (3)170 / Journal of Marketing, October 2005
  5. 5. FIGURE 2 A Conceptual Framework for CRM Strategy Strategy Development Value Creation Multichannel Integration Performance Process Process Process Assessment Process Business Value Customer Sales force Shareholder Strategy Receives Results •Value •Employer value •Business vision proposition •Customer value •Industry and Outlets •Value assessment •Shareholder value Physical competitive •Cost reduction characteristics Telephony Cocreation Performance Direct marketing Monitoring Value Organization •Standards Receives Electronic •Quantitative and •Acquisition commerce qualitative Integrated Channel Management measurement Virtual Customer economics •Retention •Results and Customer Segment Lifetime Value Analysis Strategy Mobile economics key performance •Customer choice commerce indicators and customer characteristics •Segment granularity Data Repository IT systems Front office Back office Analysis tools applications applications Information Management ProcessA Strategic Framework for CRM / 171
  6. 6. by successfully managing this value exchange, which tomers and customer segments. The value creation processinvolves a process of cocreation or coproduction, maximiz- is a crucial component of CRM because it translates busi-ing the lifetime value of desirable customer segments. ness and customer strategies into specific value proposition statements that demonstrate what value is to be delivered toThe Value the Customer Receives customers, and thus, it explains what value is to be receivedThe value the customer receives from the organization by the organization, including the potential for cocreation.draws on the concept of the benefits that enhance the cus-tomer offer (Levitt 1969; Lovelock 1995). However, there is Multichannel Integration Processnow a logic, which has evolved from earlier thinking inbusiness-to-business and services marketing, that views the The multichannel integration process is arguably one of thecustomer as a cocreator and coproducer (Bendapudi and most important processes in CRM because it takes the out-Leone 2003; Prahalad and Ramaswamy 2004; Vargo and puts of the business strategy and value creation processesLusch 2004). These benefits can be integrated in the form and translates them into value-adding activities with cus-of a value proposition (e.g., Lanning and Michaels 1988; tomers. However, there is only a small amount of publishedLanning and Phillips 1991) that explains the relationship work on the multichannel integration in CRM (e.g., Fried-among the performance of the product, the fulfillment of man and Furey 1999; Funk 2002; Kraft 2000; Sudharshanthe customer’s needs, and the total cost to the customer over and Sanchez 1998; Wagner 2000). The multichannel inte-the customer relationship life cycle (Lanning and Michaels gration process focuses on decisions about what the most1988). Lanning’s (1998) later work on value propositions appropriate combinations of channels to use are; how toreflects the cocreation perspective. However, a more ensure that the customer experiences highly positive inter-detailed synthesis of work in this area is needed in further actions within those channels; and when a customer inter-research. acts with more than one channel, how to create and present To determine whether the value proposition is likely to a single unified view of the customer.result in a superior customer experience, a company shouldundertake a value assessment to quantify the relative impor- Channel Optionstance that customers place on the various attributes of a Today, many companies enter the market through a hybridproduct. Analytical tools such as conjoint analysis can be channel model (Friedman and Furey 1999; Moriarty andused to identify customers that share common preferences Moran 1990) that involves multiple channels, such as fieldin terms of product attributes. Such tools may also reveal sales forces, Internet, direct mail, business partners, andsubstantial market segments with service needs that are not telephony. There are a growing number of channels byfully catered to by the attributes of existing offers. which a company can interact with its customers. Through an iterative process, we categorized the many channelThe Value the Organization Receives and Lifetime options into six categories broadly based on the balance ofValue physical or virtual contact (see Figure 2). These include (1)From this perspective, customer value is the outcome of the sales force, including field account management, service,coproduction of value, the deployment of improved acquisi- and personal representation; (2) outlets, including retailtion and retention strategies, and the utilization of effective branches, stores, depots, and kiosks; (3) telephony, includ-channel management. Fundamental to this concept of cus- ing traditional telephone, facsimile, telex, and call centertomer value are two key elements that require further contact; (4) direct marketing, including direct mail, radio,research. First, it is necessary to determine how existing and and traditional television (but excluding e-commerce); (5)potential customer profitability varies across different cus- e-commerce, including e-mail, the Internet, and interactivetomers and customer segments. Second, the economics of digital television; and (6) m-commerce, including mobilecustomer acquisition and customer retention and opportuni- telephony, short message service and text messaging, wire-ties for cross-selling, up-selling, and building customer less application protocol, and 3G mobile services. Someadvocacy must be understood. How these elements con- channels are now being used in combination to maximizetribute to increasing customer lifetime value is integral to commercial exposure and return; for example, there is col-value creation. laborative browsing and Internet relay chat, used by compa- Customer retention represents a significant part of the nies such as Lands End, and voice over IP (Internet proto-research on value creation. For example, Reichheld and col), which integrates both telephony and the Internet.Sasser (1990) identify the net present value profit improve-ment of retaining customers, and Rust and Zahorik (1993) Integrated Channel Managementand Rust, Zahorik, and Keiningham (1995) outline proce- Managing integrated channels relies on the ability to upholddures for assessing the impact of satisfaction and quality the same high standards across multiple, different channels.improvement efforts on customer retention and market Having established a set of standards for each channel thatshare. More recently, research has emphasized customer defines an outstanding customer experience for that chan-equity (e.g., Blattberg and Deighton 1996; Hogan, Lemon, nel, the organization can then work to integrate the chan-and Rust 2002; Rust, Lemon, and Zeithaml 2004). Calculat- nels. The concept of the “perfect customer experience,”ing the customer lifetime value of different segments which must be affordable for the company in the context ofenables organizations to focus on the most profitable cus- the segments in which it operates and its competition, is a172 / Journal of Marketing, October 2005
  7. 7. relatively new concept. This concept is now being embraced campaign management analysis, credit scoring, and cus-in industry by companies such as TNT, Toyota’s Lexus, tomer profiling.Oce, and Guinness Breweries, but it has yet to receive muchattention in the academic literature. Therefore, multichannel Front Office and Back Office Applicationsintegration is a critical process in CRM because it repre- Front office applications are the technologies a companysents the point of cocreation of customer value. However, a uses to support all those activities that involve direct inter-company’s ability to execute multichannel integration suc- face with customers, including SFA and call center manage-cessfully is heavily dependent on the organization’s ability ment. Back office applications support internal administra-to gather and deploy customer information from all chan- tion activities and supplier relationships, including humannels and to integrate it with other relevant information. resources, procurement, warehouse management, logistics software, and some financial processes. A key concern Information Management Process about the front and back office systems offered by CRM vendors is that they are sufficiently connected and cocoordi-The information management process is concerned with the nated to improve customer relationships and workflow.collection, collation, and use of customer data and informa-tion from all customer contact points to generate customer CRM Technology Market Participantsinsight and appropriate marketing responses. The key mate-rial elements of the information management process are Gartner segments vendors of CRM applications and CRMthe data repository, which provides a corporate memory of service providers into specific categories (Radcliffe andcustomers; IT systems, which include the organization’s Kirkby 2002), and Greenberg (2001) and Jacobsen (1999)computer hardware, software, and middleware; analysis provide detailed reviews of CRM vendors’ products. Thetools; and front office and back office applications, which key segments for CRM applications are Integrated CRMsupport the many activities involved in interfacing directly and Enterprise Resource Planning Suite (e.g., Oracle, Peo-with customers and managing internal operations, adminis- pleSoft, SAP), CRM Suite (e.g., E.piphany, Siebel), CRMtration, and supplier relationships (Greenberg 2001). Framework (e.g., Chordiant), CRM Best of Breed (e.g., NCR Teradata; Broadvision), and “Build it Yourself” (e.g.,Data Repository IBM, Oracle, Sun). The CRM service providers and consul-The data repository provides a powerful corporate memory tants that offer implementation support specialize in the fol-of customers, an integrated enterprisewide data store that is lowing areas: corporate strategy (e.g., McKinsey, Bain);capable of relevant data analyses. In larger organizations, it CRM strategy (e.g., Peppers & Rogers, Vectia); changemay comprise a data warehouse (Agosta 1999; Swift 2000) management, organization design, training, humanand related data marts and databases. There are two forms resources, and so forth (e.g., Accenture); business transfor-of data warehouse, the conventional data warehouse and the mation (e.g., IBM); infrastructure building and systemsoperational data store. The latter stores only the information integration (e.g., Siemens, Unisys); infrastructure outsourc-necessary to provide a single identity for all customers. An ing (e.g., EDS, CSC); business insight, research, and soenterprise data model is used to manage this data conver- forth (e.g., SAS); and business process outsourcing (e.g.,sion process to minimize data duplication and to resolve Acxiom). The need for comprehensive and scalable optionsany inconsistencies between databases. has created scope for many new products from CRM ven- dors. However, despite their claim to be “complete CRMIT Systems solution providers,” few software vendors can provide the full range of functionality that a complete CRM businessInformation technology systems refer to the computer hard- strategy requires.ware and the related software and middleware used in the The information management process provides a meansorganization. Often, technology integration is required of sharing relevant customer and other information through-before databases can be integrated into a data warehouse out the enterprise and “replicating the mind of the cus-and user access can be provided across the company. How- tomer.” To ensure that technology solutions support CRM,ever, the historical separation between marketing and IT it is important to conduct IT planning from a perspective ofsometimes presents integration issues at the organizational providing a seamless customer service rather than planninglevel (Glazer 1997). The organization’s capacity to scale for functional or product-centered departments and activi-existing systems or to plan for the migration to larger sys- ties. Furthermore, data analysis tools should measure busi-tems without disrupting business operations is critical. ness activities. This kind of analysis provides the basis for the performance assessment process.Analytical ToolsThe analytical tools that enable effective use of the datawarehouse can be found in general data-mining packages Performance Assessment Processand in specific software application packages. Data mining The performance assessment process covers the essentialenables the analysis of large quantities of data to discover task of ensuring that the organization’s strategic aims inmeaningful patterns and relationships (e.g., Groth 2000; terms of CRM are being delivered to an appropriate andPeacock 1998). More specific software application pack- acceptable standard and that a basis for future improvementages include analytical tools that focus on such tasks as is established. This process can be viewed as having two A Strategic Framework for CRM / 173
  8. 8. main components: shareholder results, which provide a the potential problems associated with a narrow technologi-macro view of the overall relationships that drive perfor- cal definition of CRM and realize strategic benefits. Ourmance, and performance monitoring, which provides a research was based on large industrial companies becausemore detailed, micro view of metrics and key performance the size and complexity of such enterprises is likely to pre-indicators. sent the greatest CRM challenges. We did not examine issues related to small or medium-sized companies andShareholder Results nonprofit organizations in this work.To achieve the ultimate objective of CRM, the delivery of This study contributes to the marketing literature in sev-shareholder results, the organization should consider how to eral ways. First, our work extends a managerial perspectivebuild employee value, customer value, and shareholder that stresses the importance of cross-functional processes invalue and how to reduce costs. Recent research on relation- CRM strategy and contributes to the positioning of theships among employees, customers, and shareholders has poorly defined CRM concept within the marketing litera-emphasized the need to adopt a more informed and inte- ture. Second, it provides a process-based conceptual frame-grated approach to exploiting the linkages among them. The work for strategic CRM and identifies key elements withinservice profit chain model and related research focuses on each process. Third, it makes a contribution to the limitedestablishing the relationships among employee satisfaction, literature on interaction research. Finally, the research rep-customer loyalty, profitability, and shareholder value (e.g., resents a grounded contribution that offers managers insightHeskett et al. 1994; Loveman 1998). Organizations also into the development and implementation of CRM strate-need to focus on cost reduction opportunities. Two means of gies. To date, this framework has been used by companiescost reduction are especially relevant to CRM: deployment to address several issues, including surfacing problematicof technologies ranging from automated telephony services CRM issues, planning the key components of a CRM strat-to Web services and the use of new electronic channels such egy, identifying which process components of CRM shouldas online, self-service facilities. The development of models receive priority, creating a platform for change, and bench-such as the service profit chain has been important in marking other companies’ CRM activities.enabling companies to consider the effectiveness of CRM at Much research remains to be done in the exploration ofa strategic level in terms of improving shareholder results. the multifaceted nature of CRM. Sheth (1996) notes that for an emerging management discipline, it is important to havePerformance Monitoring an acceptable definition that encompasses all facets to focusDespite a growing call for companies to be more customer understanding and growth of knowledge in the discipline.oriented, there is concern that, in general, the metrics used He proposes a multistage process for achieving this thatby companies to measure and monitor their CRM perfor- begins with delimiting the domain, agreeing on a definition,mance are not well developed or well communicated. developing performance measures, and developing explana-Ambler’s (2002) research findings raise particular concern; tory theory. The framework we propose in this article offershe finds that key aspects of CRM, such as customer satis- a potentially useful starting point for the development offaction and customer retention, only reach the board in 36% improved insight into these aspects of CRM theory. Theand 51% of companies, respectively. Even when these met- task of delimiting the domain, agreeing on a definition forrics reach the board level, it is not clear how deeply they are CRM, and building a research agenda will be an evolvingunderstood and how much time is spent on them. Tradi- process in this nascent area. We do not attempt to build suchtional performance measurement systems, which tend to be a research agenda in the current work; however, we empha-functionally driven, may be inappropriate for cross- size the importance of CRM implementation and relatedfunctional CRM. people issues as an area in which further research is Recent efforts to provide cross-functional measures, urgently needed. Initial work by Ebner and colleaguessuch as the balanced scorecard (Kaplan and Norton 1996), (2002), Gummesson (2002b, c), Henneberg (2003), Pettitare a useful advance. The format of the balanced scorecard (2002), and Rigby, Reichheld, and Schefter (2002) providesenables a wide range of metrics designs. Indicators that can a useful platform from which to develop this importantreveal future financial results, not just historical results, research area.need to be considered as part of this process. Standards,metrics, and key performance indicators for CRM should Appendixreflect the performance standards necessary across the five Some Definitions and Descriptionsmajor processes to ensure that CRM activities are plannedand practiced effectively and that a feedback loop exists to of CRM •CRM is an e-commerce application (Khanna 2001).maximize performance improvement and organizational •CRM is a term for methodologies, technologies, and e-learning. A consideration of “return on relationships” commerce capabilities used by companies to manage cus-(Gummesson 2004) will assist in identifying further metrics tomer relationships (Stone and Woodcock 2001).that are relevant to the enterprise. •CRM is an enterprisewide initiative that belongs in all areas of an organization (Singh and Agrawal 2003). •CRM is a comprehensive strategy and process of acquiring, Discussion retaining, and partnering with selective customers to createIn this article, we develop a cross-functional, process-based superior value for the company and the customer (ParvitiyarCRM strategy framework that aims to help companies avoid and Sheth 2001).174 / Journal of Marketing, October 2005
  9. 9. •CRM is about the development and maintenance of long- •CRM involves using existing customer information to term, mutually beneficial relationships with strategically sig- improve company profitability and customer service (Could- nificant customers (Buttle 2001). well 1999). •CRM includes numerous aspects, but the basic theme is for •CRM attempts to provide a strategic bridge between informa- the company to become more customer-centric. Methods are tion technology and marketing strategies aimed at building primarily Web-based tools and Internet presence (Gosney and long-term relationships and profitability. 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