Models for Customer Relation Management
Customer relationship management is a methodology to manage the company’s interaction with the current and future prospective customers. It uses technology to organize, schedule, automate, and synchronize marketing, sales, customer services.
CRM is a customer oriented. It gives one to one solution to Customer’s demands. Direct online communication with customer and service centers helps customer solve their issues with ease.
Various Models have been proposed for Customer Relationship Management
The IDIC approach was formulated by Peppers and Rogers (2004). As Per IDIC model, Companies should vigilantly take four actions to improve the one to one relationship with customers:
- Identifyingwho the customers and developing a thorough understanding for their needs and requirements. This can be done through surveys and meetings.
- Differentiatingcustomers to pick out categories of customers which are of most valuable today and future. Differentiation allows companies to formulate customer specific strategies to cater individual customer needs. Different clients are of different value to the company and also have different needs from the organization. According to Peppers and Rogers (2004), customer differentiation involves segregating customers on the basis of their value and needs.
- Interactingwith customers to ensure that companies understand customer’s needs and potential and their relationship with other suppliers. Companies should increase effective ness of their interaction with customers by using carefully planning the interaction. Each successive interaction with a customer should take place in the context of all previous interactions with that customer. Each interaction should start off from where the previous one ended. Effective and careful interaction with customers provide better insight into needs and expectations of customer
- Customizingthe deal and communications to ensure that needs and expectations of customers are properly met. A company should alter its policy toward a customer based on customer’s needs and values. To include a customer in a relationship, the company needs to adapt its policy to appease the customer needs. this might entail “mass-customization a product or tailoring some aspect of its service” (Peppers, Rogers and Dorf, 1999).
Quality Competiveness Index Model
QCI are independent specialist who enables blue chip organizations in managing customers. They are both theorists and foremost practitioners of their ideas. (Hewson et al, 2002). The QCI model shown below is described as below.
Figure: The QCI Customer Management Model (Hewson et all, 2002)
QCI is described as customer management model instead of relationship model. At the center of the model, they model a variety of activities needed by companies to perform in order to acquire and maintain customers. This model includes the use of technology to effectively accomplish these activities.
The Customer Relationship Management CRM Value Chain Model
The CRM value chain (figure. 2.7) is an approach which businesses can follow when developing their CRM strategies (Buttle, 2004). This model has been developed and used in various SMEs such as IT, Software, telecom, financial services, media, manufacturing, retail and construction etc. This model rests on strong theoretical principles and practical needs of a business..
Figure 2.8: The CRM Value Chain (Buttle, 2000)
The chief goal of this model as per Buttle (2004), is to establish long term mutually beneficial relationships between strategically significant and high valued customers. Therefore , some customers are mere expensive to acquire and service.
Four types of strategically significant customer SSC such as the high life time value (LTV) customer were identified by Buttle. LTV is a Key SSC and the present day of all margins that may be earned in a relationship. Buttle says that not all high volume customers have high LTV. If such a customer demands JIT, or customized delivery or are costly to serve like in remote locations, their value is reduced significantly. A company that applied activity based costing disciplines in order to trance the costs to its customer base and then re-engineered its manufacturing and logistic processes and sales department negotiated price increase.
The second group of strategically siginificant customers is “benchmarks” that are customers which other people copy. A case in point may be of a company that manufactures vending machines. Such a company is ready to do business with any company because “they can tell other customers that thery are supplying this equipment to worlds biggest Vending operations”.
The third group fo SCCs are called as customer’s inspiration. They discover new ways of doing things, they come up with new product ideas, find ways of improving quality or cost reduction. They are complainers, and demanders and fastidious customers. Although such customers have low life time value but they are source of significant information and insight on potential sources value.
The fourth group, says Buttle (2004) are cost magnets relating to those that absorb uneven high volume of fixed costs. This makes smaller customers to become profitable.
Stevenson(2007), says that CVC includes four stages:
The first one deals with grouping customer in order to determine which of the customers are more profitable. The companies must seek their target customer base. Companies should group and rank their clients into groups who are most desirable to do business which fulfill their criteria of what a desirable customer is. This is called as Stevenson (2007) says, Customer Portfolio Analysis.
The following stage is building intimacy with the customer. Once firms knows which segments to pursue, they must get to know the ones in that particular segment in a very detailed way better than their competitors. For example, to appear that they know their customers intimately by, for example knowing their birthday, or number of their children and their birthday , or asking about the health of someone close to them.
The third stage relates to Value Proposition Definition. Understanding as much as they can about the customers they have chosen to serve, the companies are in a better position to create a tailored and customer specific value proposition.
Buttle (2000) previously raised five steps to profitable relationships that are, customer portfolio analysis (CPA), customer intimacy, network development, value proposition development and managing the relationship.
Very briefly Customer Portfolio Analyses, as per Buttle (2000) , the customer base to identify customers to target with different value propositions. The customer intimacy pushes the business to get to know how to know the selected customers as segments or individuals and building a customer database which must be accessible to all those whose decisions are activities impact upon the customer attitude and behavior. Butlle involves third step as network development where in a strong network of relationships is to be built with employees, suppliers, partners and investors who know the requirements of chose customers.
The fourth stage rotates around developing, with the agreement of network, the propositions which are valuable mutually to the customer and company. At this level, the network has to work together to create and effectively deliver the chosen values to the selected customers. Great value is “found more effective and more efficient solutions of customers problems” (Buttle, 2000). The final step is to manage the customer relationship. However the above activities are needed to be managed. Companies must manage the customer through the lifecycle of theirs. To enhance the management of the customer lifecycle and stages within of portfolio analysis, intimacy, and value propositions development, automated data handling and management systems are necessary.
Payne’s Five Force Model
This comprehensive model was developed by Adrian Payne. The approach signifies five core processes in Customer Relationship Management such as the
- Strategy development process
- The value creation process
- The multichannel Integration process
- The performance assessment process
- Information management process
They can be grouped into strategic CRM, operational customer relationship management CRM and analytical CRM.
Figure 2.9: The Strategic Model for CRM (Payne, 2006).
Payne (2006) also introduced a strategic framework/model (Figure 2.8) for Customer Relationship Management CRM consisting of five generic processes such as Strategic Development, Value Creation, Multichannel Integration, Information Management, and Performance Assessment.
The Strategy Development process is related with integrating the business strategy from the organization angle and the customer strategy as to how firm should interact and choose its customers. The value creation process can with the main purpose of sorting out the benefits the firm can create for the customer and the value the organization can also benefit from. The multichannel integration consists of integrating all the virtual , physical, and online channels with which firms plans to interact. The main aim of this is to create an experience that is uniform, consistent and common, regardless of the channel.
The Information Management process comprises of many diverse Data repository systems, back and front office applications and analytical tools. Therefore it is necessary to access the visibility of the system for performance assessment and strategic monitoring can be used to evaluate customer standards and satisfaction.
Various authors have developed Customer Relationship Management CRM strategy framework. Buttle (2001) provides a Customer Relationship Management CRM value chain which identifies a series of ‘primary stages’ highlighted above. These are helpful as it considers implementation issues. Sue and Morin (2001) propose an approach for CRM based on initiatives, expected results and contribution. However, 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 the customer targeting; how to build relationships with the targeted customers; privacy issues’ and metrics for measuring the success of the Customer Relationship Management CRM program. All these approaches give some helpful insights; however Payne and Frow (2005) argue that none of these appear to adopt an explicit cross-functional process-based conceptualization; They interviewed expert executives with extensive experience within CRM and IT sectors to sort out the specific cross sectional processes. Both authors identify five CRM processes including: strategic development; value creation; multi-channel integration; information management; and performance assessment
The Dasai et al /Conceptual Model
The model was developed by Dasai el al (2007) which considers CRM performance from both internal and external perspectives. The dynamic ability for CRM is key fountain for competitive CRM performance considering the rapidly changing nature of business environment today which erodes the values of existing competencies (figure below).
Figure: Conceptual Model (from Desai et al, 2007)
The figure above counts resources re-configurability, social networking capability and market orientation as the drivers of dynamic capability for CRM. While the IT variables act as moderators to link the relationship between dynamic capability for CRM and competitive CRM performance. IT tool are the CRM technology and knowledge management agents. The Direct effect of IT tools on CRM should be tested.
The Forrester CRM model is divided into four sub types such as: Strategy; Process, Technology; and People. The model produced its results in findings on over hundred companies using CRM as strategically, thorough analysis of numerous vendor’s solutions providers and consultants. The firms willing to kick-start their CRM programs or those that are finding it tough to get best out of their CRM programs after it has been launched. The performance score card highlights the criteria adopted by companies to measure overall performance using.
Figure: Forrester CRM Model (from Forrester Research, 2008)
Figure: CRM Performance Scorecard (Forrester Research, 2008)
Author says that above score card looks familiar to that designed by Gartner Group (IDM, 2002). Yet, few criteria were used. This its natural to aver that the Forrester’s CRM performance score cards is better or improved than that of Gartner. Following table represents Gartner’s scorecard
The Maturity Model
CRM Maturity Model by Gartner was used by the group in rating enterprises in terms of their capabilities in effectively using CRM. To determine the place onto organization is placed in the model, they are first evaluated in terms of overall CRM vision, strategy, valued customer experience, organizational collaboration, processes, information, technology and metrics.
All these attributes are included in Garner’s Performance measurement scorecard which was discussed earlier. But the difference here is that , haven scored performance based on these elements but maturity models also enfranchises the firm to know their position at present and where they want to be in future and what are requirements for achieveing that specific goal. It is a tool which every organization aiming to satisfy and enhance the customer experience and maintain a lead in among its rivals, should make use of regularly.
The model looks like this
Table : Gartner’s CRM Maturity Model for Enterprise (Gartner Group, 2001)
From the frame works and approaches analyzed earlier in discourse, it can be observed that similarities cut across them. Using Forrester Research as benchmark and placing Frameworks by Dasai et al and Payne on both sides of Forrester’s framework, each of the components in the approach were linked together, enunciating that all have the 4 components of Forrester’s frameworks embedded in them.
The Figure above elucidates the components of these frameworks contains. On the left in Dasai’s Framework, strategy is customer focus and organization focus while strategic development and value creation is in Payne’s Framework. A successful enterprise understands how the customer base can be transformed into a valuable asset through the delivery of a value proposition.