Customer Relationship Management. Perspectives from the Marketplace

309 Pages·2003·4.63 MB·English

by  Simon Knox, Stan Maklan, Adrian Payne, Joe Peppard and Lynette Ryals (Auth.)

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Foreword
CRMhasconfoundedthebusinessworldsinceitsinception.Indeed,analysts
Gartnercalculatethat65percentofCRMprojectsfailedlastyear(2001).
YetindustryremainscommittedtoCRM:despiteaninhospitableITinvestment
climate, spending projections for the sector remain in the ascendancy.
The reason for the perseverance is obvious: a coterie of businesses is getting
CRMrightandachievingimpressiveresults.Perhapsmorefundamentally,busi-
nessesappreciatetheinherentlogicthatunderpinsCRMpractice,andthesense
in adhering to its guidelines however maddening this can prove to be at times.
AsaCRMtechnologyvendor,mybusinessgrappleseverydaywiththereali-
ties of what best-practice CRM entails. Quite simply, it is about understanding
customers and helping them to satisfy their individual needs. Of course, behind
that it is about helping businesses to increase their own value.
With adeft touch, thisbookunravelsthecurious mix ofsocial, technological
and business changes that have spawned the CRM industry. The scale of the
research is breathtaking; it offers insight from the industry’s leading thinkers,
and is peppered with case study examples from a range of industries.
In Customer Relationship Management: Perspectives from the Marketplace,
one is left with a real sense of the potential of CRM to deliver business value,
providedcertainingredientsareinplace.Gettingseniormanagementtobuyinto
CRM at an early stage is perhaps the most critical of these ingredients. To that
end, I could not recommend a wiser starting point than this enthralling book. I
hope you enjoy and are as provoked as much as I was from it.
Michael Kelly
Founder and CEO
FINEOS Corporation
About the authors
SIMON KNOX BSc PhD
Professor of Brand Marketing
Simon Knox is Professor of Brand Marketing at the Cranfield School of
Management in the UK and is a consultant to a number of multinational com-
panies including McDonald’s, Levi Strauss, DiverseyLever, BT and Exel. Upon
graduating, he followed a career in the marketing of international brands with
Unileverplcinanumberofseniormarketingrolesinbothdetergentsandfoods.
Since joining Cranfield, Simon has published over 100 papers and books on
strategic marketing and branding and is a regular speaker at international con-
ferences. He is a Director of the Cranfield Centre for Advanced Research in
Marketing in the School and is currently leading a research team looking at
the impact of Corporate Social Responsibility on Brand Management. He is
the co-author of two recent books, Competing on Value, published by FT
Pitman Publishing in the UK, Germany, the USA and China, and Creating a
Company for Customers, published by FT Prentice-Hall, in the UK, Brazil and
India.
STAN MAKLAN BA MBA
Visiting Fellow and PhD Candidate
Stan Maklan is an experienced marketer and management consultant with
senior, international line management experience in blue chip consumer and
business marketing companies.
Stanspentthefirst10yearsofhiscareerinmarketingwithUnileverCanada,
UKandSweden,wherehewasMarketingDirectorofitsToiletriesbusiness.He
xii Abouttheauthors
spent the following 10 years largelyin consulting,most recentlywithSapient, a
leading builder of new economy businesses as a senior manager specializing in
CRMandmarketingstrategy.Previously,Stanwasamanagingconsultantwith
one of the world’s largest IT-management consulting firms, CSC Computer
Sciences. Stan established CSC UK’s Customer Relationship Management prac-
tice and then moved to a role within its European Consulting and global man-
agement research unit (Research Services). Prior to that, Stan had his own
consulting firm specializing in business to business marketing; clients included
Motorola, Dell, Santa Cruz Operation, Hong Kong Telecom, Molyncke,
Southern Water, Atomic Energy Authority Technology and British Olympic
Association.
Stan was awarded honours for academic excellence when he obtained a
Masters of Business Administration from the University of Western Ontario
(Canada) and has a Bachelor of Science (Economics) from the Universite´ de
Montre´al. He is a French and Swedish speaker, and a regular contributor to
marketing seminars, courses and publications.
ADRIAN PAYNE MEd MSc PhD FRMIT
Professor of Services and Relationship Marketing
Adrian Payne is Professor of Services and Relationship Marketing and Director
oftheCentreforCustomerRelationshipManagementattheCranfieldSchoolof
Management, Cranfield University.
Hehaspracticalexperienceinmarketing,marketresearch,corporateplanning
and general management. His previous appointments include positions as chief
executive for a manufacturing company and he has also held senior appoint-
ments in corporate planning and marketing.
He is an authority on Relationship Marketing and Customer Relationship
Managementandisanauthorofsixbooksonthesetopics.Hisresearchinterests
are in Customer Retention Economics; the impact of IT on CRM; and
Marketing Strategy and Planning in Service Businesses. Adrian is a frequent
keynote speaker at public and in-company seminars and conferences around
the world. He also acts as a consultant and educator to many service organiza-
tions, professional service firms and manufacturing companies.
JOE PEPPARD BBS MSc PhD FICS
Senior Research Fellow in Information Systems
Joe Peppard is a Senior Research Fellow at the Information Systems Research
Centre (ISRC). A Graduate of Trinity College Dublin he previously spent five
yearslecturingathisalmamater,joiningCranfieldin1992.Hehasheldvisiting
positions at Groningen University in Holland and the University of South
Australia and is currently external examiner at a number of institutions. Joe is
Abouttheauthors xiii
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a Director of Fineos Corporation and Sophos Development, and a member of
the Editorial Board of the European Management Journal.
S
Joe has been involved with the ISRC since its establishment and has worked
on many of the centre’s research projects. He is a Fellow of the Irish Computer
S
Society, a charter member of the Association for Information Systems and a
member Sof the UK Academy of Information Systems, British Academy of
ManagemSent, and the Academy of Management. His publications include IT
Strategy for Business (Pitman Publishing), The Essence of Business Process Re-
engineering (Prentice-Hall International), Business Process Re-engineering:
Current Perspectives and Research Directions (Kogan Page), and Strategic
Planning for Information Systems (Wiley), as well as articles in both academic
and general business journals. He is retained by a number of companies as an
adviser on IS/IT, e-commerce and strategy related matters.
LYNETTE RYALS MA (OXON) MBA FSIP
Marketing Lecturer
Lynette Ryals began her career in the City as a fund manager and stockbroker
trading UK equities, options and futures, and still lectures occasionally on
finance issues. She then moved to a marketing company to work on corporate
development and acquisitions, subsequently transferring into the consultancy
arm of the same business group.
Lynette is a Registered Representative of the London Stock Exchange and is
the only woman in the UK to have passed the Fellowship examinations of the
Society of Investment Professionals.
Sheisco-authorofCustomerRelationshipManagement:TheBusinessCase,a
management report in the FT Prentice-Hall series, with Simon Knox and Stan
Maklan.
LynettehasalsobeenDirectoroftheExecutiveMBAprogrammeatCranfield.
Acknowledgements
Theauthors would liketo thankMargritBass,a freelance journalist,forher
major contribution to the book – by ensuring that six of the cases were
delivered on time and with the appropriate management emphasis. In many
ways, writing the cases proved to be only part of the challenge; gaining access
tothecompaniesandtheirmanagers,agreeingwiththemwhatcouldandshould
be disclosed and, finally, getting agreement to publish what had been written
aboutthecompanyanditsCRMpracticesallprovedtobebothtime-consuming
and requiring considerable diplomatic skills! Margrit proved more than up to
thejobindevelopingthecasestudiesforOrange,Homebase,SunMicrosystems,
RS Components, asserta home and NatWest.
Jane Simms, a freelance writer and editor specializing in marketing and busi-
ness management, carried the burden of editing the entire book by joining
together chapters in a masterly way and contributing parts of the text. We
would like to thank Jane for her patience and professionalism.
We wish tothank Sapient Ltd forits financialcontributionandhelp withthe
Homebase and asserta home cases, both of whom were Sapient clients.
Finally, our thanks to Gill Glass for her secretarial support in maintaining,
updating and formatting the files we created as the book was written, starting
with Adrian Payne’s strategic framework for CRM, through case study writing
to the final chapter on CRM futures. Without Gill’s meticulous attention to
detail and responsiveness to last minute changes, we could not have delivered
the manuscript in such a highly finished format.
xvi Acknowledgements
With the exception of the case study on Siemens, the cases are the Copyright
oftheCranfieldSchoolofManagementandarepublishedwiththeirpermission.
Professor Simon Knox
Stan Maklan
Professor Adrian Payne
Dr Joe Peppard
Lynette Ryals
Note
Please note that the term ‘billion’ is used throughout this book meaning a
thousand million (1000,000,000).
1
Chapter
CRM top of the management
agenda
In an era of increasingly transient management themes, few board agenda
items are attracting the sustained attention of Customer Relationship
Management, or CRM. To provide some measure of the explosion of manage-
ment interest in CRM, UK market research company Forrester Research
searchedthe Dow Jones’ contentbase of more than 6000 management publica-
tions for references about CRM and found 6048 articles in 2000, up from 442
articles in 1998 (Chatham et al. 2001).
Thissuddenproliferationofreferencescanbepartlyexplainedbythelackofa
widelyaccepteddefinitionforCRM:consequentlymanagersandwritersusethe
term broadly to describe all forms of transactions between customers and their
suppliers.Inthisbook,welookatCRMasanorganization-wideprocess,which
focuses its activities on treating different customers differently to increase value
for both customer and organization. In an article on its web site, the European
Centre forCustomer Strategies quotes Hewson Consulting’sdefinitionof CRM
as ‘a business strategy focusing on winning, growing and keeping the right
customers’ (European Centre for Customer Strategies 2001). A recent CRM
report published by the Financial Times (Ryals et al. 2000) suggests that
CRM consists of three main elements:
1. identifying,satisfying,retainingandmaximizingthevalueofthefirm’sbest
customers;
2 CustomerRelationshipManagement
2. wrappingthefirmaroundthecustomertoensurethateachcontactwiththe
customer is appropriate and based upon extensive knowledge both of the
customer’s needs and profitability;
3. creating a complete picture of the customer.
The Financial Times report identifies the major components for the successful
implementation of CRM as:
& a front office that integrates sales, marketing and service functions across
media (call centres, people, stores, internet);
& adatawarehousetostorecustomerinformationandtheappropriateanalytic
tools with which to analyse the data and learn about customer behaviour;
& business rules developed from the data analysis to ensure the front office
benefits from the firm’s learning about its customers;
& measures of performance that enable customer relationships to continually
improve;
& integrationintothefirm’soperationalandsupport(or‘backoffice’)systems,
ensuring that the front office’s promises are delivered.
Developing a consistent approach to managing customer relationships has been
a core objective for the Royal Bank of Canada in implementing its CRM
strategy:
EXAMPLE
TheRoyal Bankof Canada began collecting customer data in1978 and
by the early 1990s hadimplemented clientsegmentation inits data
warehouse, dividing its customersinto three distinct profitability
segments. Whilethis provided front-line staff with segmentation codes,
these were often interpreted subjectively,resulting in an inconsistent
approach at corporate level.
Following research,the bank set about implementing a CRM strategy
which allowed itto offer customers an integrated serviceacrossits entire
productrange. Toachieve this itneeded to measureclientofferings, cost
management, pricing initiativesand marketing spend. Thebank usesfive
criteria toanalyse customer information: income, expenseand risk (net
interest revenue); otherrevenue (fees, commission);direct expense
(variablecost); indirectexpense (overheads);andrisk provision. The
bank also recognized thatprofitability was affected by the typeand
frequency of customerevents, their balances and the channels they use.
CRMtopofthemanagementagenda 3
S
S
The Royal Bankof Canada’sninemillion customers aresegmented,
however, ithas developed strategies not only for these segments but also
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for hundreds ofmicro-segments, as itmoves towards its objective ofone-
to-onemarketing. Itplans to develop individualtreatment strategies on
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smallcellsof customers toestablishwhat works and what doesn’t, and to
test refSinements on an ongoingbasis.
TheScustomerdata are also allowingitto move from assessing current
customer value to potentialvalue, by taking into account factorssuchas
lifestyle changes. Thebankhasalso recognized that‘there isno such
thing as an unprofitablecustomer’ and istailoring its product offerings to
suit what are normallyconsidered to be unprofitable customers. One of
the immediate gains was discovering from recalculating customer
profitability that its previous measurementmetrics had been inaccurate
for as many as75 per cent of its customers.
CRM is not only being written about; big businesses are actively investing in
CRM initiatives and technologies. A Forrester report (Callinan et al. 2001)
quotes from its first quarter 2001 North America Benchmark study that 82
per cent of firms in the study have CRM implementations planned or in pro-
gress. This result is consistent with other published surveys and suggests that
most big businesses are actively implementing some facets of one-to-one or
relationship marketing.
Popular three-letter acronyms come and go, but we believe that the core of
CRM will continue as an enduring foundation of most businesses. Creating
satisfied customers at a profit has been espoused as the prime role of business
sincePeterDruckerfirstwroteaboutitalmost50yearsago(Drucker1954:‘itis
the customer who determines what a business is ... the purpose of a firm is to
create and keep customers’). However, operationally, the traditional focus of
business is improving efficiencies. This focus on efficiency has its roots deep in
economicthought.AdamSmithdidnotwriteaboutcustomersatisfaction,reten-
tionandrelationships;hedevelopedtheoriesofspecialization,divisionoflabour
and production efficiencies. Economic theory that originates from his model of
perfect markets assumes that competition for undifferentiated products drives
prices down to a level necessary merely to sustain investment in continued
production. In this model, there are no brands, product differentiation, loyal
customers or excess profits. In Adam Smith’s world, merely being an efficient
producerofcommodities,acceptingthepriceandvolumedictatedbythemarket
satisfies the firm.
Ourprofessionalandpersonalexperiencesuggeststhatfirmsinacompetitive
market are anything but passive price and volume takers. Firms innovate in