A Strategic Framework for Customer Relationship Management

Author(s): Adrian Payne and Pennie Frow

Source: Journal of Marketing, Vol. 69, No. 4 (Oct., 2005), pp. 167-176
Published by: American Marketing Association
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AdrianPayne & Pennie Frow

A Strategic
forCustomer
Framework
Relationship
Management

In this article,the authors develop a conceptual frameworkforcustomer relationshipmanagement (CRM) that

helps broaden the understandingof CRM and its role in enhancingcustomervalue and, as a result,shareholder
value. The authorsexplore definitional
three alternativeperspectivesof CRM.
aspects of CRM, and theyidentify
The authorsemphasize the need fora cross-functional,
process-orientedapproach thatpositionsCRM at a stratefivekeycross-functional
CRM processes: a strategydevelopmentprocess, a value creation
gic level.They identify
an
information
process,
process, a multichannel
integration
managementprocess, and a performanceassessment
based on these processes and explorethe role and function
process. They develop a new conceptual framework
of each element in the framework.
The synthesisof the diverse concepts withinthe literatureon CRM and relashould providedeeper insightintoachievingsuccess
tionshipmarketingintoa single, process-based framework
withCRM strategyand implementation.

ver

thepastdecade,therehas been an explosionof

interestin customerrelationshipmanagement
(CRM) by both academicsand executives.However,despitean increasingamountof publishedmaterial,
mostof whichis practitioner
thereremainsa lack
oriented,
of agreement
aboutwhatCRM is and how CRM strategy
should be developed.The purposeof this articleis to
thatposidevelopa process-oriented
conceptualframework
tionsCRM at a strategic
levelby identifying
thekeycrossfunctional
of CRM
processesinvolvedin thedevelopment
More
aims
the
of
this
article
are
strategy.
specifically,
.To identify
alternative
ofCRM,
perspectives
.Toemphasize
theimportance
ofa strategic
toCRM
approach
within
a holistic
context,
organizational
.To proposefivekeygeneric
cross-functional
that
processes
can use to developand deliveran effective
organizations
CRMstrategy,
and
.To developa process-based
framework
forCRM
conceptual
andtoreview
theroleandcomponents
strategy
development
ofeachprocess.

cize theseverelack of CRM researchthattakesa broader,

morestrategic
focus.The articledoes not explorepeople
issuesrelatedto CRM implementation.
Customerrelationship managementcan fail when a limitednumberof
to theinitiative;
thus,employee
employeesare committed
andchangemanagement
areessentialissuesin
engagement
CRM implementation.
In our discussion,we emphasize
suchimplementation
andpeopleissuesas a priority
areafor
further
research.

CRM Perspectives and Definition

The term"customer
relationship
management"
emergedin
the information
vendor
and
technology(IT)
community
in
the
It
is
often
to
mid-1990s.
used
practitioner
community
describetechnology-based
customer
such
as
sales
solutions,
forceautomation
the
(SFA). In the academiccommunity,
terms"relationship
and
CRM
are
often
used
marketing"
interchangeably
(Parvatiyarand Sheth 2001). However,
CRM is morecommonly
used in thecontextof technology
solutions
and
has
been
described
as "information-enabled
We organizethisarticlein threemainparts.First,we
and
relationship
marketing"
(Ryals
Payne 2001, p. 3).
threealternative
exploretheroleof CRM and identify
perand
Johnston
Zablah,
(2003,
Beuenger,
p. 116) suggestthat
spectivesof CRM. Second, we considerthe need for a
CRM
is
"a
to relationship
philosophically-related
offspring
cross-functional
process-basedapproach to CRM. We
which
is
for
the
most
in theliteramarketing
part
neglected
fivekey
developcriteriaforprocessselectionand identify
and
conclude
that
"further
of CRM
ture,"
they
exploration
CRM processes.Third,we proposea strategic
conceptual
and
its
related
is
not
warranted
butalso
phenomena
only
framework
thatis constructed
of thesefiveprocessesand
needed."
desperately
examinethecomponents
ofeachprocess.
A significant
problemthatmanyorganizations
deciding
The development
of thisframework
is a responseto a
to
CRM
face
stems
from
the
deal
of
confusion
adopt
great
and
Krafft, Hoyer(2004), whocritichallengebyReinartz,
aboutwhatconstitutes
CRM. In interviews
withexecutives,
whichformed
of
our
research
part
process(we describethis
we
a wide rangeof views
Adrian
is
found
Professor
of
Services
and
and
process subsequently),
Payne
Relationship
Marketing
Director
oftheCentre
forCRM(e-mail:
and
aboutwhatCRM means.To some,it meantdirectmail,a
a.payne@cranfield.ac.uk),
Pennie
Frow
isVisiting
inMarketing
Fellow
(e-mail:
p.frow@cranfield.ac.
loyaltycard scheme,or a database,whereasothersenviSchoolofManagement,
Cranfield
Theauthors sionedit as a
uk),Cranfield
University.
help desk or a call center.Some said thatit
thefinancial
ofBTplcandSASwith
thisresearch,
acknowledge
support
was
about
a datawarehouseor undertaking
data
populating
andthey
thank
thethree
JMreviewers
andtheconsulting
edianonymous
others
considered
CRM
an
e-commerce
mining;
solution,
tors
for
their
onprevious
comments
versions
ofthis
article.
helpful
suchas theuse of a personalization
engineon theInternet
(c)2005,American
Association
Marketing
ISSN:0022-2429
1547-7185
(print),
(electronic)

167

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Journal
ofMarketing
Vol.69 (October
2005),167-176

or a relationaldatabasefor SFA. This lack of a widely

of CRM can contribute
definition
acceptedand appropriate
views
to thefailureofa CRM projectwhenan organization
or
undertakes
CRM froma limitedtechnology
perspective
basis.
CRM on a fragmented
of CRM thatdifferent
and descriptions
The definitions
a
use varyconsiderably,
authorsand authorities
signifying
alternative
of
To
CRM
identify
perspecvariety
viewpoints.
of
definitions
anddescriptions
tivesofCRM, we considered
in the
CRM froma rangeof sources,whichwe summarize
fromthis
Appendix.We excludedother,similardefinitions
list.
thatwe
An important
aspect of the CRM definition
wantedto examinewas its associationwithtechnology.
is oftenincorThis is important
becauseCRM technology
rectlyequated with CRM (Reinartz,Krafft,and Hoyer
2004), and a keyreasonforCRM failureis viewingCRM
initiative
as a technology
(Kale 2004). For thisreason,we
intheAppendixwithspecialattention
reviewthedefinitions
This reviewsuggeststhat
to theiremphasison technology.
narCRM can be definedfromat leastthreeperspectives:
and
as
a
solution,
tactically
particulartechnology
rowly
and customercentric.Thesepertechnology;
wide-ranging
as a continuum
(see Figure1).
spectivescan be portrayed
which spentmore
One organizationwe interviewed,
than$30 millionon IT solutionsand systemsintegration,
describedCRM solelyin termsof its SFA project.At this
and tacticallyas a parCRM is definednarrowly
extreme,
ticulartechnologysolution(e.g., Khanna2001). We call
suchas thatof
1." Otherdefinitions,
thisCRM "Perspective
Kutnerand Cripps(1997), thoughsomewhatbroader,also
fallintothiscategory.
the term
In anotherorganization
thatwe interviewed,
CRM was used to referto a wide range of customerorientedIT and Internetsolutions,reflecting
Stone and
Thisrepresented
CRM "PerWoodcock's(2001) definition.
spective2," a pointnearthemiddleofthecontinuum.
"Perspective3" reflectsa more strategicand holistic
approachto CRM thatemphasizesthe selectivemanageto createshareholder
value.
mentof customer
relationships
This reflectselementsof severalpreviouslynoteddefinitions of CRM, includingthose of Buttle(2001), Glazer

(1997), Singhand Agrawal(2003), and Swift(2000). Following this phase of our work,we identifiedZablah,
whichsupported
(2003) research,
Beuenger,andJohnston's
ourviewoftheseperspectives.
The importance
of how CRM is definedis notmerely
affectsthe way an
semantic.Its definitionsignificantly
entireorganizationaccepts and practicesCRM. From a
CRM is notsimplyan IT solutionthat
strategic
viewpoint,
is used to acquireand growa customer
base; it involvesa
of
a
vision;
corporateunderprofoundsynthesis strategic
in
a multichannel
of
the
nature
of
customer
value
standing
information
theutilization
of theappropriate
environment;
and
and
CRM
applications; high-quality
opermanagement
and service.Thus,we proposethatin
ations,fulfillment,
CRM shouldbe positionedin thebroad
anyorganization,
of
context
3.
Perspective
strategic
Swift(2000) argues,and we concur,thatorganizations
CRM definiwillbenefitfromadoptinga relevantstrategic
itsconsistent
use throughout
tionfortheirfirmandensuring
ofCRM
theirorganization.
Thus,we developeda definition
thatreflected
3. We examinedtheCRM literaPerspective
intoa
ture,synthesized
aspectsof the variousdefinitions
andthentesteditwithpracticing
draftdefinition,
managers.
we wentthrough
severaliteraAs ourresearchprogressed,
whichwe use
tions.The resultis thefollowingdefinition,
forthepurposesofthisstudy:
thatis concerned
withcreatCRMis a strategic
approach
thedevelopment
shareholder
valuethrough
ingimproved
withkeycustomers
andcusofappropriate
relationships
ofrelationship
CRMunites
thepotential
tomer
segments.
andIT tocreate
strategies
profitable,
long-term
marketing
withcustomers
andother
keystakeholders.
relationships
to use dataand
CRM provides
enhanced
opportunities
andcocreate
to bothunderstand
customers
information
valuewiththem.
Thisrequires
a cross-functional
integraandmarketing
tionofprocesses,
capapeople,operations,
bilitiesthatis enabledthrough
information,
technology,
andapplications.
This definitionprovidedguidance for our subsequent
research considerationsand the strategicand crossfunctionalemphasis of the conceptual frameworkwe
developed.

FIGURE 1
The CRM Continuum
CRM Defined
Narrowly
and Tactically

CRM is about the

ofa
implementation
specifictechnology
solutionproject.

CRM Defined
Broadly and
Strategically

CRM is the
ofan
implementation
integratedseries of
customer-oriented
technologysolutions.

CRM is a holistic
approach to managing
customerrelationships
to create shareholder
value.

ofMarketing,
October2005
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Processes: A StrategicPerspective

Gartner(2001) calls fora freshapproachto businessprocessesin CRM thatinvolvesbothrethinking

howtheseprocesses appearto thecustomer
andreengineering
themto be
morecustomer
centric.Kale (2004) supports
thisviewand
all
arguesthata criticalaspectofCRM involvesidentifying
that
take
between
an
strategicprocesses
place
enterprise
and its customers.
To addressthischallengeof adoptinga
freshapproachto CRM processes,we aimedto identify
the
relevant
to
CRM.
keygenericprocesses
We examinedtheliterature
to identify
criteappropriate
ria forprocessselectionbutfoundlittleworkin thisarea,
withtheexceptionof thecontribution
Sherby Srivastava,
vani,andFahey(1999),whoestablishfourprocessselection
criteria
formarketing
andbusinessprocesses.We chosetheir
workas a starting
of process
pointforthe identification
selectioncriteriaforCRM. The criteriatheseauthorspropose are as follows:First,theprocessesshouldcomprisea
smallsetthataddressestaskscriticalto theachievement
of
an organization's
goals. Second,each processshouldcontributeto the value creationprocess.Third,each process
shouldbe ata strategic
ormacrolevel.Fourth,
theprocesses
needto manifest
clearinterrelationships.
As partof ourresearch,
we conducteda workshop
with
a panelof 34 highlyexperienced
CRM practitioners,
all of
whomhadextensive
in theCRM andIT sectors.
experience
The director
ofa leadingresearchandmanagement
institute
specializingin theCRM and IT sectorsselectedthepanel.
were selectedon the basis of the following
Participants
attributes
to ensurethattheywere knowledgeableabout
and its operation:substantial
CRM, its implementation,
and
industrial
management
experience(average of 17.2
years),maturity
(averageage of 40.2 years),international
and
representation international
experience(managersfrom
nine countriesattended;most of themhad international
and academicqualifications
experience),
(degreeor equivaIn
the
first
of
the
which
involvedsmall
lent).
part
workshop,
the
reviewed
and
unanigroupsessions, panel
subsequently
that
these
four
criteria
were
mouslyagreed
fullyappropriate
forselectingCRM processes.However,theyalso proposed
two further
criteria:First,each processshouldbe crossfunctional
in nature,and second,each processwould be
consideredby experienced
as beingbothlogipractitioners
cal andbeneficialto understanding
anddevelopingstrategic
CRM activities.We used these six criteriato select key
genericCRM processes.

A ConceptualFramework
forCRM

Grabner-Kraeuter
andMoedritscher
(2002) suggestthatthe
absenceof a strategic
framework
forCRM fromwhichto
definesuccessis one reasonforthedisappointing
resultsof
Thisviewwas supported
bothbythe
manyCRM initiatives.
seniorexecutiveswe interviewed
duringour researchand
by Gartner's(2001) research.Our nextchallengeswereto
identify
key genericCRM processesusingthepreviously
describedselectioncriteriaandto developthemintoa conforCRM strategy
ceptualframework
development.
Our literature
reviewfoundthatfewCRM frameworks
exist;thosethatdid werenotbased on a process-oriented

of CRM. For example,

cross-functional
conceptualization
forCRM
Sue and Morin(2001, p. 6) outlinea framework
basedon initiatives,
but
and
expectedresults, contributions,
this is not processbased, and "manyinitiativesare not
in theframework."
identified
Winer(2001, p. 91)
explicitly
a
"basic
which
contains
a set of 7 basic
model,
develops
a
of
database
customer
components:
activity;analysesof
thedatabase;giventheanalyses,decisionsaboutwhichcustomersto target;toolsfortargeting
thecustomers;
how to
build relationships
withthe targetedcustomers;privacy
thesuccessof theCRM
issues;and metricsformeasuring
program."
Again,thismodel,thoughuseful,is nota crossfunctional
This gap in the
process-based
conceptualization.
literature
suggeststhatthereis a needfora new systematic
framework.
process-basedCRM strategy
Synthesisof the
diverseconceptsin theliterature
on CRM and relationship
intoa single,process-basedframework
should
marketing
to helpcompaniesachievegreater
providepracticalinsights
successwithCRM strategy
andimplementation.
development
Interaction Research
and theoryare typicallybased on
Conceptualframeworks
commonsense,and expericombiningpreviousliterature,
ence (Eisenhardt1989). In thisresearch,we integrated
a
withlearningfromfield-based
synthesisof the literature
interactions
withexecutives
to developandrefinetheCRM
strategyframework.In this approach, we used what
Gummesson(2002a) terms"interactionresearch."This
formof researchoriginates
fromhis viewthat"interaction
and communication
play a crucialrole" in the stagesof
researchand that testingconcepts, ideas, and results
interaction
withdifferent
through
targetgroupsis "an integral part of the whole researchprocess" (p. 345). The
sourcesforthesefield-based
whichincludeexecuinsights,
tivesprimarily
fromlarge enterprises
in the business-tobusinessand business-to-consumer
sectors,includedthe
following:
'Anexpert
executives;
panelof34 highly
experienced
'Interviews
with20 executives
in CRM,marketing,
working
andIT rolesincompanies
inthefinancial
services
sector;
'Interviews
withsixexecutives
from
and
largeCRMvendors
with five executivesfromthreeCRM and strategy
consultancies;
'Individual
andgroupdiscussions
withCRM,marketing,
and
IT managers
at workshops
with18 CRM vendors,
analysts,
andtheirclients,
Accenture,
Baan,BroadVision,
including
Chordiant,
EDS, E.piphany,
Hewlett-Packard,
IBM,Gartner,
NCR Teradata,Peoplesoft,
Oracle,SAP, SAS Institute,
Siebel,Sybase,andUnisys;
theframework
as a planning
toolinthefinancial
ser'Piloting
vicesandautomotive
and
sectors;
as a planning
toolin twocompanies:
'Usingtheframework
and globallogistics.
Six workglobaltelecommunications
shopswereheldineachcompany.
Process Identificationand the CRM Framework
We beganby identifying
possiblegenericCRM processes
fromtheCRM andrelatedbusinessliterature.
We thendiscussed these tentativeprocesses interactively
with the
The outcomeofthisworkwas a short
groupsofexecutives.
A Strategic
Framework
forCRMI 169

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list of sevenprocesses.We thenused theexpertpanel of

CRM executives
whohad assistedin thedevelexperienced
opmentof the processselectionschemato nominatethe
andto agree
CRM processesthattheyconsidered
important
on thosethatwerethemostrelevantand generic.Afteran
initialgroupworkshop,
each panel memberindependently
a
list
his or her view of the key
completed
representing
genericprocessesthatmet the six previouslyagreed-on
The datawerefedbackto thisgroup,anda
processcriteria.
detaileddiscussionfollowedto help confirmour underoftheprocesscategories.
standing
As a resultof thisinteractive
method,fiveCRM proall five
wereidentified;
cessesthatmettheselectioncriteria
were agreedon as important
genericprocessesby more
Subsethantwo-thirds
of the groupin the firstiteration.
of theseas key
quently,we receivedstrongconfirmation
genericCRM processesby severalof theothergroupsof
fivegenericprocesseswere(1) the
The resultant
managers.
strategydevelopmentprocess, (2) the value creation
integration
process,(4) the
process,(3) the multichannel
information
management
process,and (5) theperformance
assessment
process.
thesefivekeygenericCRM proWe thenincorporated
Thisinitial
cessesintoa preliminary
conceptualframework.
and the developmentof subsequentversions
framework
refinedby ourinteracwerebothinformed
by and further
executivegroups:mangersfromthe
tionswithtwoprimary
previouslynoted companies and executivesfromthree
CRM consultingfirms.Participantsat severalacademic
conferenceson CRM and relationshipmarketingalso
andcriticisms
ofpreviousversions.
assistedwithcomments
we combineda
Withevolvingversionsof theframework,
interactions
field-based
literature
with
of
relevant
synthesis
a conwent
framework
The
the
through
involving groups.
and minorrevisions;
siderablenumberof majoriterations
thefinalversionappearsin Figure2.
set
illustrates
theinteractive
Thisconceptualframework
of strategicprocesses thatcommenceswith a detailed
reviewof an organization's
(thestrategy
developstrategy
in busimentprocess)and concludeswithan improvement
ness resultsand increasedshare value (the performance
advanassessmentprocess).The conceptthatcompetitive
and
customer
for
the
of
value
the
creation
from
stems
tage
forthe businessand associatedcocreationactivities(the
value creationprocess)is well developedin themarketing
For largecompanies,CRM activitywill involve
literature.
usingcustomerand otherrelecollectingand intelligently
vantdata (theinformation
process)to builda consistently
superiorcustomerexperienceand enduringcustomerrelaintegration
process).The iterationships(themultichannel
is highlighted
tivenatureof CRM strategy
by
development
in Figthearrowsbetweentheprocessesin bothdirections
ure 2; they representinteractionand feedback loops
betweenthedifferent
processes.The circulararrowsin the
value creationprocessreflectthe cocreationprocess.We
in each
now examinethe key componentswe identified
interaction
used
the
we
our
with
As
work,
prior
process.
of these process
researchmethodin the identification
components.

StrategyDevelopmentProcess

This processrequiresa dual focus on the organization's

businessstrategy
and its customerstrategy.
How well the
two interrelate
affectsthe success of its
fundamentally
CRM strategy.
Business Strategy
mustbe consideredfirstto determine
The businessstrategy
shouldbe developedand how it
howthecustomerstrategy
shouldevolveovertime.The businessstrategy
processcan
of a company's
commencewitha reviewor articulation
vision, especiallyas it relatesto CRM (e.g., Davidson
2002). Next, the industryand competitiveenvironment
should be reviewed.Traditionalindustryanalysis (e.g.,
Porter1980) shouldbe augmented
by morecontemporary
Christensen
Slaterand Olson 2002)
2001;
approaches(e.g.,
andNalebuff1997),
to includeco-opetition
(Brandenburger
anddeeperenvironmental
networks
analysis(Achrol1997),
and
and theimpactof disruptive
(Christensen
technologies
Overdorf
2000).
Customer Strategy
of
is usuallytheresponsibility
Whereasbusinessstrategy
directheboard,andthestrategy
thechiefexecutiveofficer,
of the
is typicallytheresponsibility
tor,customerstrategy
AlthoughCRM requiresa crossmarketing
department.
based
functional
approach,it is oftenvestedin functionally
Whendifferent
roles,includingIT and marketing.
departmentsare involvedin the two areas of strategy
development,specialemphasisshouldbe placed on thealignment
ofbusinessstrategy.
andintegration
involvesexaminingtheexistingand
Customerstrategy
whichformsofsegcustomer
base andidentifying
potential
As
are mostappropriate. partof thisprocess,the
mentation
for
needsto considerthelevel of subdivision
organization
This involves
or segmentgranularity.
customersegments,
a macro,micro,or one-to-one
decisionsaboutwhether
segis
mentation
(Rubin1997).
approach appropriate
Several authorsemphasizethe potentialfor shifting
or one-to-one,
froma mass marketto an individualized,
environment.
opportuniExploitinge-commerce
marketing
of the
economiccharacteristics
ties and the fundamental
can enable a muchdeeperlevel of segmentation
Internet
in mostotherchannels(e.g.,
thanis affordable
granularity
thestrategy
Peppersand Rogers1993, 1997). In summary,
ofbusiprocessinvolvesa detailedassessment
development
cusof
an
and the development
ness strategy
appropriate
a
with
the
This shouldprovide
tomerstrategy.
enterprise
its
and
to
on which develop
clearerplatform
implement
CRM activities.

ValueCreationProcess

the outputsof the

The value creationprocesstransforms
that both
into
programs
process
strategydevelopment
extractand delivervalue. The threekey elementsof the
whatvalue the
value creationprocessare (1) determining
what
companycan provideto itscustomer;(2) determining
and (3)
valuethecompanycan receivesfromitscustomers;

October2005
ofMarketing,
170/Journal

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and

valu(
value
value
Process Results
Performance
Assessment
Shareholder

and

reduction

performance

Monitoring
Performance

?Employer
?Customer
?Shareholder
?Cost

measurement
key
indicators
qualitative
?Standards
?Quantitative
?Results

office
Back
applications

Intrigated channel management

office
Process
Front
applications

Integration

Strategy
CRM
2 for

Process force

Sales

Outlets

Multichannel

marketing
Repository
Mobile
Electronic
Telephony
commerce
commerce
Direct
Data
tools

virtual

Physical

Analysis

FIGURE
Framework

Management

Information

Customer segment lifetime value analysis

Conceptual
A
Creation
Process
Value

vf4

Customer assessment
Receives

proposition
Value ?Value
?Value

Value
Receives
Cocreation
Organization
economics
economics

vision
and
Strategy
Process Business
Strategy
Development

competitive
characteristics
?Business
?Industry

systems
IT

?Acquisition
?Retention

choice granularity
Strategy
customer
Customer

andcharacteristics
?Customer
?Segment

A Strategic
Framework
forCRM/171

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by successfullymanagingthis value exchange,which

maximizinvolvesa processof cocreationor coproduction,
the
of
customer
lifetime
desirable
value
segments.
ing
The Value the Customer Receives
The value the customerreceives fromthe organization
drawson theconceptof thebenefitsthatenhancethecustomeroffer(Levitt1969;Lovelock1995).However,thereis
in
now a logic, whichhas evolvedfromearlierthinking
and servicesmarketing,
thatviewsthe
business-to-business
customeras a cocreatorand coproducer(Bendapudiand
Leone 2003; Prahaladand Ramaswamy2004; Vargoand
in theform
Lusch 2004). These benefitscan be integrated
and
Michaels
of a value proposition
1988;
(e.g., Lanning
the
that
and
1991)
relationship
explains
Phillips
Lanning
of
of the product,thefulfillment
amongtheperformance
over
thecustomer's
needs,andthetotalcosttothecustomer
lifecycle(Lanningand Michaels
thecustomer
relationship
1988). Lanning's(1998) laterworkon value propositions
reflectsthe cocreationperspective.However, a more
of workin thisarea is neededin further
detailedsynthesis
research.
is likelyto
whether
thevalueproposition
To determine
a companyshould
customer
resultin a superior
experience,
therelativeimporto quantify
a valueassessment
undertake
of a
tancethatcustomersplace on the variousattributes
product.Analyticaltools such as conjointanalysiscan be
thatsharecommonpreferences
customers
used to identify
Such tools mayalso reveal
in termsof productattributes.
withserviceneedsthatare not
marketsegments
substantial
ofexistingoffers.
the
attributes
fullycateredto by
The Value the Organization Receives and Lifetime
Value
valueis theoutcomeofthe
customer
Fromthisperspective,
ofimproved
the
of
acquisicoproduction value, deployment
of effective
the
utilization
and
and
retention
tion
strategies,
to thisconceptof cusFundamental
channelmanagement.
tomervalue are two key elementsthatrequirefurther
and
howexisting
research.
First,itis necessaryto determine
cusdifferent
across
varies
customer
profitability
potential
tomersand customersegments.Second,theeconomicsof
andopportuniretention
customer
acquisitionandcustomer
ties for cross-selling,up-selling,and buildingcustomer
advocacymustbe understood.How theseelementsconto increasingcustomerlifetimevalue is integralto
tribute
valuecreation.
a significant
Customerretention
partof the
represents
and
Reichheld
researchon value creation.For example,
value
thenetpresent
Sasser(1990) identify
improveprofit
and Rustand Zahorik(1993)
mentof retaining
customers,
and Rust,Zahorik,and Keiningham(1995) outlineproceand quality
duresforassessingthe impactof satisfaction
market
and
retention
on
customer
efforts
improvement
researchhas emphasizedcustomer
share.More recently,
and Deighton1996; Hogan,Lemon,
equity(e.g., Blattberg
andRust2002; Rust,Lemon,andZeithaml2004). Calculatsegments
ing the customerlifetimevalue of different
custo focuson themostprofitable
enablesorganizations

tomersand customersegments.
The valuecreationprocess
of CRM becauseit translates
busiis a crucialcomponent
value
into
ness andcustomer
strategies specific
proposition
thatdemonstrate
whatvalueis to be deliveredto
statements
andthus,itexplainswhatvalueis to be received
customers,
forcocreation.
thepotential
the
including
by
organization,

Multichannel IntegrationProcess

The multichannel
integration
processis arguablyone ofthe
mostimportant
processesin CRM becauseit takestheoutand value creationprocesses
putsof thebusinessstrategy
themintovalue-addingactivitieswithcusand translates
tomers.However,thereis onlya smallamountofpublished
in CRM (e.g., Friedworkon themultichannel
integration
manand Furey1999; Funk2002; Kraft2000; Sudharshan
inteand Sanchez 1998; Wagner2000). The multichannel
most
what
the
on
about
grationprocessfocuses decisions
of channelsto use are; how to
combinations
appropriate
ensurethatthecustomerexperienceshighlypositiveinteractionswithinthosechannels;and whena customerinteractswithmorethanone channel,howto createand present
a singleunifiedviewofthecustomer.
Channel Options
a hybrid
Today,manycompaniesenterthemarketthrough
channelmodel (Friedmanand Furey1999; Moriartyand
Moran1990) thatinvolvesmultiplechannels,suchas field
and
directmail, businesspartners,
sales forces,Internet,
of
channels
number
There
a
are
by
growing
telephony.
withitscustomers.
whicha companycan interact
Through
an iterativeprocess, we categorizedthe many channel
optionsintosix categoriesbroadlybased on thebalanceof
physicalor virtualcontact(see Figure2). Theseinclude(1)
sales force,includingfieldaccountmanagement,
service,
and personalrepresentation;
(2) outlets,includingretail
includbranches,stores,depots,and kiosks;(3) telephony,
center
and
call
traditional
telex,
facsimile,
telephone,
ing
contact;(4) directmarketing,
includingdirectmail,radio,
television(butexcludinge-commerce);(5)
and traditional
and interactive
e-commerce,
includinge-mail,theInternet,
includingmobile
digitaltelevision;and (6) m-commerce,
wiretext
service
and
short
messaging,
message
telephony,
less applicationprotocol,and 3G mobile services.Some
to maximize
channelsare now beingused in combination
for
and
commercial
return;
example,thereis colexposure
Internet
and
laborative
relaychat,usedbycompabrowsing
nies suchas Lands End, and voice overIP (Internet
protoInternet.
and
the
both
which
col),
integrates telephony
Integrated Channel Management
channelsrelieson theabilityto uphold
Managingintegrated
channels.
different
acrossmultiple,
thesamehighstandards
that
channel
for
each
of
standards
a
set
established
Having
customerexperienceforthatchandefinesan outstanding
thechancan thenworkto integrate
nel, theorganization
nels. The conceptof the "perfectcustomerexperience,"
forthecompanyin thecontextof
whichmustbe affordable
is a
thesegmentsin whichit operatesand its competition,

October2005
ofMarketing,
172/Journal

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newconcept.Thisconceptis nowbeingembraced
relatively
in industry
by companiessuch as TNT, Toyota'sLexus,
and
Guinness
butithas yettoreceivemuch
Breweries,
Oce,
in theacademicliterature.
attention
multichannel
Therefore,
a
it repreis
critical
in
CRM
because
integration
process
sentsthepointof cocreationof customer
value.However,a
succompany'sabilityto executemultichannel
integration
is
on
the
cessfully heavilydependent
organization's
ability
to gatherand deploycustomerinformation
fromall channelsandto integrate
itwithotherrelevant
information.

Information
ManagementProcess

The information
management
processis concernedwiththe
dataandinformacollection,
collation,anduse ofcustomer
tionfromall customercontactpointsto generatecustomer
insightandappropriate
marketing
responses.The keymaterial elementsof the information
management
processare
thedatarepository,
whichprovidesa corporate
memoryof
IT
which
include
the
customers; systems,
organization's
computerhardware,software,and middleware;analysis
which
tools; and frontofficeand back officeapplications,
the
activities
involved
in
support many
interfacing
directly
withcustomers
and managinginternal
adminisoperations,
andsupplierrelationships
tration,
2001).
(Greenberg
Data Repository
The datarepository
providesa powerful
corporate
memory
of customers,
an integrated
datastorethatis
enterprisewide
dataanalyses.In largerorganizations,
it
capableof relevant
maycomprisea datawarehouse(Agosta1999; Swift2000)
and relateddata martsand databases.Thereare twoforms
ofdatawarehouse,
theconventional
datawarehouseandthe
datastore.The latterstoresonlytheinformation
operational
forall customers.
An
necessaryto providea singleidentity
data modelis used to managethisdata converenterprise
sion processto minimizedata duplicationand to resolve
betweendatabases.
anyinconsistencies
IT Systems
Information
referto thecomputer
hardtechnology
systems
wareand therelatedsoftware
and middleware
used in the
organization.Often,technologyintegrationis required
beforedatabasescan be integrated
intoa data warehouse
and useraccess can be providedacrossthecompany.Howand IT
ever,the historicalseparationbetweenmarketing
sometimes
issues at theorganizational
presentsintegration
level (Glazer 1997). The organization's
capacityto scale
to largersysexistingsystemsor to plan forthemigration
temswithout
business
is
disrupting
operations critical.
Analytical Tools
The analyticaltools thatenable effective
use of the data
warehousecan be foundin generaldata-mining
packages
and in specificsoftware
applicationpackages.Data mining
enablestheanalysisof largequantitiesof data to discover
meaningful
patternsand relationships
(e.g., Groth2000;
Peacock 1998). More specificsoftwareapplicationpackages includeanalyticaltools thatfocus on such tasks as

campaignmanagement
analysis,creditscoring,and customerprofiling.
Front Officeand Back OfficeApplications
Frontofficeapplicationsare the technologiesa company
uses to supportall thoseactivitiesthatinvolvedirectinterfacewithcustomers,
SFA andcall centermanageincluding
ment.Back officeapplicationssupportinternal
administrationactivitiesand supplierrelationships,
includinghuman
warehouse
resources,procurement,
management,
logistics
software,and some financialprocesses.A key concern
aboutthe frontand back officesystemsofferedby CRM
vendorsis thattheyaresufficiently
connected
andcocoordinatedto improvecustomer
and
workflow.
relationships
CRM Technology MarketParticipants
Gartnersegmentsvendorsof CRM applicationsand CRM
serviceprovidersinto specificcategories(Radcliffeand
(2001) and Jacobsen(1999)
Kirkby2002), and Greenberg
detailed
reviews
of
CRM
vendors'products.The
provide
for
CRM
CRM
key segments
applicationsare Integrated
and Enterprise
ResourcePlanningSuite(e.g., Oracle,PeopleSoft,SAP), CRM Suite(e.g., Epiphany,Siebel), CRM
Framework(e.g., Chordiant),CRM Best of Breed (e.g.,
NCR Teradata;Broadvision),and "Build itYourself'(e.g.,
andconsulIBM, Oracle,Sun).The CRM serviceproviders
tantsthatoffer
implementation
support
specializein thefollowingareas: corporatestrategy(e.g., McKinsey,Bain);
CRM strategy(e.g., Peppers& Rogers,Vectia); change
management, organization design, training, human
and so forth(e.g.,Accenture);businesstransforresources,
mation(e.g., IBM); infrastructure
buildingand systems
outsourcintegration
(e.g., Siemens,Unisys);infrastructure
ing (e.g., EDS, CSC); businessinsight,research,and so
forth(e.g., SAS); and businessprocessoutsourcing
(e.g.,
and scalableoptions
Acxiom).The needforcomprehensive
has createdscope formanynew productsfromCRM vendors.However,despitetheirclaim to be "completeCRM
solutionproviders,"
fewsoftware
vendorscan providethe
fullrangeof functionality
thata completeCRM business
strategy
requires.
The information
management
processprovidesa means
ofsharingrelevant
customer
andotherinformation
throughout the enterprise
and "replicating
the mindof the customer."To ensurethattechnology
solutionssupportCRM,
itis important
to conductIT planningfroma perspective
of
a seamlesscustomer
serviceratherthanplanning
providing
forfunctional
or product-centered
and actividepartments
ties.Furthermore,
data analysistoolsshouldmeasurebusiness activities.
This kindof analysisprovidesthebasis for
theperformance
assessment
process.

Performance
AssessmentProcess

The performance
assessmentprocesscoversthe essential
task of ensuringthatthe organization's
strategicaims in
termsof CRM are beingdeliveredto an appropriate
and
standard
and
that
a
basis
for
future
acceptable
improvement
is established.This processcan be viewedas havingtwo
A Strategic
Framework
forCRM1173

This content downloaded from 130.238.7.43 on Fri, 10 Oct 2014 03:16:49 AM

All use subject to JSTOR Terms and Conditions

main components:shareholderresults,whichprovidea
macroview of the overallrelationships
thatdriveperforwhichprovidesa
mance, and performance
monitoring,
moredetailed,microviewof metricsand keyperformance
indicators.
Shareholder Results
To achievetheultimateobjectiveof CRM, thedeliveryof
shareholder
theorganization
shouldconsiderhowto
results,
build employeevalue, customervalue, and shareholder
valueandhowto reducecosts.Recentresearchon relationand shareholders
has
shipsamongemployees,customers,
the
need
to
a
more
informed
and
inteemphasized
adopt
thelinkagesamongthem.The
gratedapproachto exploiting
serviceprofitchainmodeland relatedresearchfocuseson
therelationships
establishing
amongemployeesatisfaction,
customerloyalty,
and shareholder
value (e.g.,
profitability,
Heskettet al. 1994; Loveman 1998). Organizations
also
needtofocuson costreduction
Two
means
of
opportunities.
costreduction
are especiallyrelevantto CRM: deployment
of technologies
services
rangingfromautomated
telephony
toWebservicesandtheuse ofnewelectronic
channelssuch
as online,self-service
facilities.
The development
ofmodels
in
such as the serviceprofitchain has been important
to
consider
the
effectiveness
CRM
at
of
companies
enabling
a strategic
levelin termsofimproving
shareholder
results.
Performance Monitoring
Despitea growingcall forcompaniesto be morecustomer
thereis concernthat,in general,themetricsused
oriented,
by companiesto measureand monitortheirCRM performance are not well developed or well communicated.
Ambler's(2002) researchfindings
raiseparticular
concern.,
he findsthatkeyaspectsof CRM, suchas customersatisfactionandcustomer
retention,
onlyreachtheboardin 36%
and51% ofcompanies,respectively.
Even whenthesemetricsreachtheboardlevel,itis notclearhowdeeplytheyare
and how muchtimeis spenton them.Tradiunderstood
whichtendto be
measurement
tionalperformance
systems,
functionallydriven,may be inappropriatefor crossfunctional
CRM.
Recent effortsto providecross-functional
measures,
suchas thebalancedscorecard(Kaplan and Norton1996),
of thebalancedscorecard
are a usefuladvance.The format
thatcan
enablesa widerangeofmetricsdesigns.Indicators
revealfuturefinancialresults,not just historicalresults,
need to be consideredas partof thisprocess.Standards,
indicatorsforCRM should
metrics,and key performance
standards
reflecttheperformance
necessaryacrossthefive
to
ensure
that
CRM
activitiesare planned
majorprocesses
and thata feedbackloop existsto
and practicedeffectively
and organizational
maximizeperformance
improvement
learning.A considerationof "returnon relationships"
further
metrics
2004) willassistin identifying
(Gummesson
to theenterprise.
thatarerelevant

Discussion

In thisarticle,we developa cross-functional,

process-based
thataimstohelpcompaniesavoid
framework
CRM strategy

thepotential
problemsassociatedwitha narrowtechnological definition
of CRM and realize strategicbenefits.Our
researchwas based on largeindustrial
companiesbecause
thesize and complexity
of suchenterprises
is likelyto present the greatestCRM challenges.We did not examine
issues relatedto small or medium-sizedcompaniesand
in thiswork.
organizations
nonprofit
Thisstudycontributes
to themarketing
literature
in severalways.First,ourworkextendsa managerialperspective
thatstressestheimportance
ofcross-functional
processesin
CRM strategyand contributes
to the positioningof the
literapoorlydefinedCRM conceptwithinthe marketing
ture.Second,itprovidesa process-based
frameconceptual
workforstrategic
CRM and identifies
keyelementswithin
each process.Third,it makesa contribution
to thelimited
on interaction
literature
research.Finally,theresearchrepresentsa grounded
contribution
thatoffers
managersinsight
intothedevelopment
and implementation
of CRM strateTo
this
framework
has
been
used
date,
gies.
by companies
to addressseveralissues,includingsurfacing
problematic
CRM issues,planningthekeycomponents
of a CRM stratwhichprocesscomponents
of CRM should
egy,identifying
receivepriority,
forchange,and benchcreatinga platform
othercompanies'CRM activities.
marking
Muchresearchremainsto be donein theexploration
of
themultifaceted
natureofCRM. Sheth(1996) notesthatfor
an emerging
itis important
to have
management
discipline,
an acceptabledefinition
thatencompassesall facetsto focus
and growthof knowledgein thediscipline.
understanding
He proposesa multistage
processforachievingthisthat
thedomain,agreeingon a definition,
beginswithdelimiting
anddevelopingexplanameasures,
developing
performance
The framework
we proposein thisarticleoffers
torytheory.
a potentially
usefulstarting
of
pointforthe development
into
these
improvedinsight
aspectsof CRM theory.The
thedomain,agreeingon a definition
for
taskof delimiting
a
an
research
will
be
and
CRM,
building
evolving
agenda
tobuildsuch
processinthisnascentarea.We do notattempt
we emphaa researchagendain thecurrent
work;however,
and related
size the importance
of CRM implementation
people issues as an area in which furtherresearchis
urgentlyneeded. Initial work by Ebner and colleagues
(2002), Gummesson(2002b, c), Henneberg(2003), Pettit
andSchefter
(2002) provides
(2002), andRigby,Reichheld,
a usefulplatformfromwhichto develop this important
researcharea.

Appendix
and Descriptions
Some Definitions
ofCRM

.CRMis ane-commerce
2001).
(Khanna
application
and e.CRM is a termformethodologies,
technologies,
to
used
commerce
capabilities by companies managecustomer
2001).
(StoneandWoodcock
relationships
thatbelongsinall areas
initiative
.CRM is anenterprisewide
ofanorganization
2003).
(SinghandAgrawal
andprocessofacquiring,
.CRM is a comprehensive
strategy
withselective
customers
to create
andpartnering
retaining,
andthecustomer
valueforthecompany
(Parvitiyar
superior
andSheth2001).

October2005
ofMarketing,
1741Journal

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All use subject to JSTOR Terms and Conditions

of long.CRM is aboutthedevelopment
and maintenance
withstrategically
beneficial
term,
sigrelationships
mutually
nificant
customers
2001).
(Buttle
is for
.CRM includes
numerous
butthebasictheme
aspects,
tobecomemorecustomer-centric.
Methods
are
thecompany
toolsandInternet
and
Web-based
presence
(Gosney
primarily
Boehm2000).
ofone-to-one
market.CRMcanbe viewedas anapplication
to an individual
ingandrelationship
marketing,
responding
on thebasisofwhatthecustomer
customer
saysandwhat
andDorf
elseis known
aboutthatcustomer
Rogers,
(Peppers,
1999).
thatenablesorganizations
to
.CRMis a management
approach
of profitable
cusand increaseretention
attract,
identify,
withthem
tomers
bymanaging
relationships
(Hobby1999).

.CRM involvesusingexistingcustomerinformation
to
andcustomer
service
(Couldimprove
company
profitability
well1999).
.CRMattempts
toprovide
a strategic
between
informabridge
tiontechnology
andmarketing
aimedat building
strategies
and profitability.
This requires
long-term
relationships
"information-intensive
(Glazer1997).
strategies"
.CRMis data-driven
andCripps1997).
(Kutner
marketing
.CRM is an enterprise
to
andinfluapproach understanding
behavior
communicathrough
meaningful
encingcustomer
tionto improve
customer
customer
retention,
acquisition,
customer
andcustomer
(Swift
2000).
loyalty,
profitability

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