Customer Relationship Management

Concepts and Technologies

Francis Buttle, Stan Maklan

• Publisher: Routledge
• Year: 2019
• ISBN:
  9781351016537
• Edition: 4
• Topic: Business
• Subtopic: Customer Relations
• Index: Business

Customer Relationship Management, Fourth Edition continues to be the go-to CRM guide explaining with unrivalled clarity what CRM is, its uses, benefits and implementation. Buttle and Maklan take a managerial perspective to track the role of CRM throughout the customer journey stages of acquisition, retention and development. Theoretically sound and managerially relevant, the book is liberally illustrated with examples of technology applications that support marketing, sales and service teams as they interact with customers, but assumes no deep technical knowledge on the reader's part. The book is structured around three core types of CRM – strategic, operational and analytical – and throughout each chapter, case illustrations of CRM in practice and images of CRM software demystify the technicalities.

Ideal as a core textbook for advanced undergraduate and postgraduate students on CRM or related courses such as relationship marketing, digital marketing, customer experience management or key account management, the book is equally valuable to industry professionals, managers involved in CRM programs and those pursuing professional qualifications or accreditation in marketing, sales or service management.

NEW TO THIS EDITION:

• New and updated international case illustrations throughout
• New and updated screenshots from CRM applications
• Fully updated to reflect the evolving CRM landscape, including extended coverage of:
• • Big data and its influence on CRM
  • Artificial intelligence (AI)
  • Advances in CRM analytics
  • The relationships between CRM and customer experience management
  • The role of social media in customer management strategy
  • Real-time marketing
  • Chatbots and innovative customer self-service
  • Privacy and data security
• Updated lecturer support materials online

Section A

Understanding customer relationships

This book is organized into six sections. Section A consists of four chapters that introduce you to the fundamentals of CRM. Chapter 1 explains what CRM is, picks out three different types of CRM, identifies CRM’s main stakeholders, and describes a number of different contexts in which CRM is used. Chapter 2 explores what we know about relationships and asks why companies and customers might want to develop relationships with each other, and why they sometimes do not. Chapters 3 and 4 investigate the three main stages of the customer journey – customer acquisition, customer retention and customer development.

Chapter 1

Introduction to CRM

Chapter objectives

By the end of the chapter, you will be aware of:

1. Three major types of CRM: strategic, operational and analytical.
2. Where social CRM fits in the CRM landscape.
3. The changing character of CRM.
4. Several common misunderstandings about CRM.
5. A definition of CRM.
6. Constituencies having an interest in CRM.
7. How CRM is deployed in a number of industries and the not-for-profit context.
8. Four models of CRM.

Introduction

The expression “Customer Relationship Management (CRM)” has been in use from the early 1990s. Since then, there have been many competing attempts to define the domain of CRM, a number of which appear in Table 1.1.

There are two main clusters of CRM definitions – those of the information technology (IT) industry and those taking a broader strategic or managerial perspective.

IT perspective on CRM

IT companies have tended to use the term CRM to describe the software tools that are used to support the marketing, selling and service functions of businesses. This equates CRM with technology. Although the market for CRM software is now populated with many players, its commercialization was greatly boosted in 1993 when Tom Siebel founded Siebel Systems Inc. (now part of Oracle). Use of the term CRM can be traced back to that period. Gartner, Inc., the information technology research and advisory firm, reported that annual spending on CRM software reached US$26.3 billion in 2015, up 12.3% from $US$23.4 billion in 2014, and forecast growth to US$80 billion by 2025.⁶ CRM spending includes both software licenses and subscriptions, and fees for cloud services including data storage. Large businesses, for example banks, telecommunications firms and retailers, were early adopters of CRM, but the current growth in CRM spending is fueled by adoptions in other sectors of developed economies, such as small and medium-sized businesses and not-for-profit organizations. Spending is also boosted by corporate investment in new IT capabilities that enable them to exploit new forms of customer data (particularly that collected in social media) and allow them to interact with customers in technology-enabled ways such as the use of chatbots.⁷ Additional growth comes from adoptions in developing economies.

Table 1.1 Definitions of CRM

CRM is an information industry term for methodologies, software and usually Internet capabilities that help an enterprise manage customer relationships in an organized way.^1

CRM is the process of managing all aspects of interaction a company has with its customers, including prospecting, sales, and service. CRM applications attempt to provide insight into and improve the company/customer relationship by combining all these views of customer interaction into one picture.^2

CRM is an integrated approach to identifying, acquiring and retaining customers. By enabling organizations to manage and coordinate customer interactions across multiple channels, departments, lines of business, and geographies, CRM helps organizations maximize the value of every customer interaction and drive superior corporate performance.^3

CRM is an integrated information system that is used to plan, schedule and control the pre-sales and post-sales activities in an organization. CRM embraces all aspects of dealing with prospects and customers, including the call center, sales force, marketing, technical support and field service. The primary goal of CRM is to improve long-term growth and profitability through a better understanding of customer behavior. CRM aims to provide more effective feedback and improved integration to better gauge the return on investment (ROI) in these areas.^4

CRM is a business strategy that maximizes profitability, revenue and customer satisfaction by organizing around customer segments, fostering behavior that satisfies customers, and implementing customer-centric processes.^5

Strategic or managerial perspective on CRM

Others take a more strategic or managerial approach to CRM. Rather than emphasizing IT applications, they take the view that CRM is a disciplined approach to managing the customer journey from the initial acquisition of a customer, to that customer becoming a high-spending, profitable advocate, and that technology may or may not have a role in journey management. This equates CRM with customer management strategy, where questions such as the following are answered: which customers should we serve, what sorts of value propositions should we present to them, and which channels should we use to serve them? Even though technology is not front-and-center in this perspective on CRM, no large organization with millions of customers interacting across multiple channels can implement a customer management strategy cost-effectively without the use of IT support, customer intelligence and carefully designed business processes.

CRM and customer experience management

This managerial perspective on CRM is closely associated with the customer experience (CX) movement.⁸ This movement is an approach to customer management that aims to understand and improve the experience of customers as they interact with business. When a company introduces new technology, new processes or new people into customer-facing roles, customer experience is often affected. CRM technologies can fundamentally change CX for the better because it reinvents what happens at customer touchpoints.

Imagine a sales rep who has always carried hard-copy brochures. He is sitting in front of a qualified prospect with a product query, but who otherwise is ready to buy. The rep goes to his briefcase. The brochure he needs is missing, and he cannot answer the query. “I’ll get back to you,” he says. But he doesn’t. He forgets, and the opportunity is lost. Supported by CRM technology, the interaction is very different. The rep carries a tablet with a current, searchable, product database and the customer’s record. He answers the query successfully. The prospect asks for a firm quote. The rep activates the quotation engine. A quote is prepared interactively with the customer. The rep requests the order. He wins the order. The rep converts the quote to an order by checking a box on a quotation engine screen. The rep shares the screen information with the customer. An electronic signature is obtained. The order is submitted immediately, confirmation is sent to the buyer’s email address and fulfilment process begins.

However, it needs to be said that CX, following a CRM technology implementation, is not always received favorably. Customers who are used to face-to-face calls from sales reps might find they are expected to place orders and pay through a sales portal. Self-service through portals deliver a completely different customer experience. Resistance, resentment and customer churn may result. Weary workers arriving home after a hard day’s labor are confronted with cold calls selling products that aren’t of the slightest interest. Customers of a multi-channel retailing firm find they receive conflicting or duplicated offers from different channels – a clear indication that customer data are held in silos. The avoidance of negative customer experience from ineptly implemented CRM is an important reason for ensuring the voice-of-the-customer is heard during CRM project planning and implementation. It also signals the importance of monitoring customer response after a CRM implementation.

Three forms of CRM

We can resolve the debate between managerial and technological schools by conceiving of CRM as taking three main forms: strategic, operational, and analytical, as summarized in Table 1.2 and described below.

Table 1.2 Types of CRM

Type of CRM	Dominant characteristic
Strategic	Strategic CRM is the customer-centric business strategy that aims at winning, developing and keeping profitable customers.
Operational	Operational CRM focuses on the integration and automation of customer-facing processes such as selling, marketing and customer service.
Analytical	Analytical CRM is the process through which organizations transform customer-related data into actionable insight for use in either strategic or operational CRM.

Strategic CRM

Strategic CRM is focused upon the development of a customer-centric business culture dedicated to winning, developing and keeping profitable customers by creating and delivering better value propositions and customer experiences than competitors. The culture is reflected in leadership behaviors, the design of formal systems of the company and the myths and stories that are created within the firm. In a customer-centric culture you would expect resources to be allocated where they would best enhance customer value, reward systems to promote employee behaviors that enhance customer engagement, satisfaction and retention, and customer information to be collected, shared and applied across the business. The heroes of customer-centric businesses deliver outstanding value or service to customers. Many businesses claim to be customer-centric, customer-led, customer-focused, or customer-oriented but few are. Indeed, there can be very few companies of any size that do not claim that they are on a mission to satisfy customer requirements profitably. Customer-centricity competes with other business logics. Philip Kotler identifies three other major business logics or orientations: product, production, and selling.⁹

Product-oriented businesses believe that customers choose products with the best quality, performance, design or features. We use the term product in a very broad sense to include anything that is offered to a customer for purchase. Products, in this sense, extend beyond tangible goods (like a cabbage or an automobile) to also include intangible-dominant services (like massage or accountancy services), experiences (like a kayak tour or a team-building weekend) and bundles of tangibles and intangibles (like a packaged vacation). In short, a product is any offer (or offering) that delivers value to customers.¹⁰ Many new business start-ups are also product-oriented. In product-oriented firms, it is common for the customer’s voice to be missing when important marketing, selling or service decisions are made. Little or no customer research is conducted, sometimes because the offering is so innovative it is very tricky for customers to evaluate the offer. Management therefore makes assumptions about what customers want and/or provides visionary leadership for the market. Perhaps the most iconic example of product-orientation is Apple. Apple has created huge demand for products that customers did not know they needed. Leading fashio...