Handbook of CRM : achieving excellence in customer management

459 Pages·2006·3.99 MB·English

by  Adrian Payne

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HANDBOOK OF CRM:
Achieving Excellence in Customer
Management
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To
Penelope and Christopher
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HANDBOOK OF
CRM:
Achieving Excellence in Customer
Management
Adrian Payne

AMSTERDAM (cid:127) BOSTON (cid:127) HEIDELBERG (cid:127) LONDON (cid:127) NEW YORK (cid:127) OXFORD
PARIS (cid:127) SAN DIEGO (cid:127) SAN FRANCISCO (cid:127) SINGAPORE (cid:127) SYDNEY (cid:127) TOKYO
Butterworth-Heinemann is an imprint of Else vier
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Butterworth-Heinemann is an imprint of Elsevier
Linacre House, Jordan Hill, Oxford OX2 8DP
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First published 2005
Copyright © 2005, Adrian Payne. All rights reserved.
The right of Adrian Payne to be identified as the author of this work has been
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British Library Cataloguing in Publication Data
Acatalogue record for this book is available from the British Library
Library of Congress Control Number: 2005922524
Acatalogue record for this book is available from the Library of Congress
ISBN-13: 978-07506-6437-0
ISBN-10: 07506-6437-1
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Contents
Preface xiii
About the Author xvii
Acknowledgements xix
Introduction 1
1 Astrategic framework for CRM 4
The origins of CRM 6
The key principles of relationship marketing 9
An emphasis on retention of profitable customers 9
An emphasis on multiple markets 9
An emphasis on a cross-functional
approach to marketing 10
The rise of CRM 11
Marketing on the basis of relationships 11
Viewing customers as business assets 12
Organizing in terms of processes 12
From reactive to proactive use of information 13
Deploying IT to maximize the value of information 14
Balancing the value trade-off 15
Developing ‘one-to-one’ marketing 16
The role of CRM 17
Varying definitions of CRM 18
The CRM continuum–three perspectives of CRM 18

Use of CRM and its terminology 20
Adefinition of CRM 22
Types of CRM 23
The size and nature of the CRM market 24
Sector growth within the CRM market 25
CRM and software vendors 25
Five key cross-functional CRM processes 29
The need for a CRM strategic framework 30
Process 1: the strategy development process 32
Process 2: the value creation process 32
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vi Contents
Process 3: the multi-channel integration process 32
Process 4: the information management process 32
Process 5: the performance assessment process 33
The structure of the book 33
Chapter 1: Developing a strategic framework for CRM 33
Chapter 2: The strategy development process 34
Chapter 3: The value creation process 34
Chapter 4: The multi-channel integration process 35
Chapter 5: The information management process 35
Chapter 6: The performance assessment process 36
Chapter 7: Organizing for CRM implementation 37
Checklist for CRM leaders 38
2 The strategy development process 39
Business strategy 41
The role of business strategy 42
Business vision 43
Industry and competitive characteristics 47
The new competitive landscape 47
Putting the new economy in context 48
Changes in industry structure and evolution 50
Analysing the industry and competitive environment 51
Focusing on business strategy 60
Customer strategy 61
The role of customer strategy 61
Customer choice and characteristics: the role of
market segmentation 62
Who is the customer? 63
Market segmentation 64
Definition of the relevant market 65
Criteria for market segment viability 65
Considering the alternative bases for segmentation 66

Segment granularity: from mass marketing to
‘one-to-one’ marketing 69
‘One-to-one’ markets and permission marketing 69
Mass customization 71
Communities or segments? 73
Focusing on customer strategy 75
Aligning business strategy and customer strategy 78
CRM strategy development 78
Product-based selling 81
Managed service and support 82
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Contents vii
Customer-based marketing 83
Individualized CRM 84
Migration paths for CRM 87
Summary 88
Checklist for CRM leaders 90
Case 2.1 DnB Nor Bank pursues an enterprising
strategy with Teradata 92
Case 2.2 RS components: towards individualized
CRM with BroadVision 97
3 The value creation process 102
The value the customer receives 103
The nature of value – what the customer buys 104
How the core and augmented offer add value 104
How relationships add value 111
How brands add value 117
The value proposition 123
Formulating the value proposition 124
The value delivery system 128
Building the value proposition 129
Value assessment 130
Traditional means of customers’
assessment of value 131
Improving value assessment using trade-off
analysis 132
The value the organization receives 135
Customer profitability 136
Why customers differ in their real profitability 137
Understanding future profit potential 139
Customer acquisition and its economics 140
Customer acquisition at United Electricity plc 140
Acquisition within different channels 142

Improving acquisition activities 142
Customer retention and its economics 143
Customer retention at United Electricity plc 144
Why retention improvement impacts profitability 145
Acquisition and retention activities in practice 146
Aframework for customer retention improvement 148
Step 1: measurement of customer retention 148
Step 2: identification of causes of defection
and key service issues 148
Step 3: corrective action to improve retention 149
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viii Contents
Customer segment lifetime value 149
Defining the role of customer lifetime value 150
Calculating customer lifetime value 152
Building profit improvement 153
Summary 155
Checklist for CRM leaders 157
Case 3.1 BT – creating new customer value propositions 159
Case 3.2 Building new value propositions at Zurich Financial
Services 164
4 The multi-channel integration process 168
Channel participants and channel options 169
The development of electronic channels 170
Reviewing industry channel structures 171
Channel participants 171
Reviewing channel alternatives 172
Understanding structural change – the role of
intermediaries 173
Disintermediation 173
Reintermediation 174
Benchmarking structural change 175
Orientation of intermediaries 176
Developing market structure maps 177
Channel options and categories 179
Channel categories 179
Mobile commerce as a separate channel category 180
Integration and the channel categories 184
Sales force 185
Outlets 185
Telephony 186
Direct mail 187
E-commerce 187

M-commerce 188
Combining channels 189
Channel strategies 190
Channel strategy options 191
The role of a multi-channel strategy 192
Understanding the customer relationship life-cycle 193
Understanding the customer experience 195
The customer experience and emotional goodwill 196
Evaluating the customer experience 196
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The customer experience within channel 198
The customer experience across channels 198
Improving the customer experience – the role of technology 199
The ‘perfect’ customer experience 200
Building a multi-channel strategy 205
Develop strategic multi-channel objectives 205
Understand needs and concerns of key customer segments 206
Undertake a strategic review of industry structure and
channel options 208
Understand shifts in channel usage patterns 209
Review channel economics 210
Economics of the online retail toy market 211
Economics of the online grocery market 211
Develop an integrated channel management strategy 212
Planning channel strategy across stakeholders 214
Summary 215
Checklist for CRM leaders 216
Case 4.1 Ideal Boilers: a mobile solution for plumbers 218
Case 4.2 Guinness – Delivering the ‘Perfect Pint’ 222
5 The information management process 226
The role of information, IT and information management 228
Information 228
IT 228
Information management 229
The information management process 230
The technical barriers in CRM 232
The data repository 233
Selecting and combining technology options for CRM 236
Tactical database and decision support systems 237
Data marts 239
Enterprise data warehouse 241

Integrated CRM solutions 243
The choice of technology options 245
Analytical tools 247
Standard data mining 248
Visualization tools 248
Segmentation, prediction, deviation
detection and link analysis 248
Neural networks 250
Decision trees 250