Customer Relationship Management: From Strategy To Implementation

Adrian Payne, Pennie Frow, Cranfield School of Management, UK

Abstract

This paper examines Customer Relationship Management, or CRM, from the perspective of
both strategy formulation and implementation. We commence by briefly reviewing the
origins and role of CRM and highlighting the importance of adopting a cross-functional
approach to CRM strategy formulation. We review alternative approaches to CRM strategy
development and, using an ‘interaction research’ approach, propose a model that addresses
both CRM strategy and implementation. We identify four critical implementation components
of a successful CRM programme and examine these in the context of five key cross-
functional CRM processes.

Keywords: CRM, customer relationship management, relationship marketing

Introduction

The purpose of CRM is to efficiently and effectively increase the acquisition, growth and
retention of profitable customers by selectively initiating, building and maintaining
appropriate relationships with them. Developments in information technology can help
improve customer relationships and make it possible to gather vast amounts of customer data
and to analyze, interpret and utilize it constructively. However, there is often a gap between
an organisation’s CRM vision and the results it obtains. The purpose of this paper is to
propose an integrated model of CRM strategy and implementation that can help organizations
realize their CRM vision more effectively. Specifically, the objectives of this paper are to: (1)
briefly review the evolution of CRM and emphasise a cross-functional approach to CRM; (2)
review the development of alternative approaches to CRM strategy development;(3) propose
a model for both CRM strategy and implementation; (4) discuss initial experience of using
the model in companies.

The Origins and Evolution of CRM

CRM is based on the principles of relationship marketing (RM) which is regarded as one of
the key areas of modern marketing and has generated great research interest (Sheth 2000).
We view RM as a paradigmatic shift in marketing (e.g. Grönroos, 1997; Gummesson, 1997;
Parvatiyar and Sheth, 1997). The increased interest in ‘one to one’ marketing (Peppers and
Rogers, 1993) raised the potential for shifting from a mass to individualized or ‘one-to-one’
marketing. Relationship-based approaches have been increasingly advocated over the last
fifteen years (e.g., Grönroos, 1994; Gummesson, 2002b; Webster, 2002; Vargo and Lusch,
2004). With its roots in RM, CRM is a relatively new management discipline. Parvitiyar and
Sheth (2001) point out the two terms are often used interchangeably. Contributors to this
literature emphasize the key role of multiple stakeholders (e.g. Christopher, Payne and
Ballantyne, 1991; Kotler, 1992; Buttle 1999; Gummesson, 1999). We adopt the perspective of
Ryals and Payne (2001) who propose that RM is concerned with relationships with multiple
stakeholders, while the focus of customer relationship management should be primarily on the
customer.

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In 2003, Zablah, Beuenger and Johnston observed that CRM was “for the most part neglected
in the literature and that further exploration of CRM and its related phenomena was not only
warranted, but also desperately needed. Some useful initial work has been done on the
conceptualization of CRM (e.g., Meta Group, 2001; Srivastava, Shervani and Fahey, 1999;
Sue and Morin, 2001; Winer, 2001; Zablah, Beuenger and Johnston, 2003; Payne and Frow,
2005) and on issues associated with implementation (e.g., Ebner et al., 2002; Henneberg,
2003; Pettit, 2002; Rigby, Reichheld and Schefter, 2002), however much work still remains to
be done. A brief analysis of the literature on CRM systems points, historically, to
implementation problems. For example Gartner Group (2003) found some 70% of CRM
projects resulted in either losses or no bottom-line improvement. As CRM vendors have
largely driven the initial emphasis on CRM, they must be seen as at least part of the problem
with respect to the failure of many CRM systems. However, more recent work analysis
(Rigby and Ledingham, 2004) has shown companies are now reporting improved satisfaction
with their CRM investments.

In a recent review of CRM, Boulding et al. (2005) argue that the field of CRM has now begun
to converge on a common definition: “Specifically, CRM relates to strategy, managing the
dual-creation or value, the intelligent use of data and technology, the acquisition of customer
knowledge and the diffusion of this knowledge to the appropriate stakeholders, the
development of appropriate (long-term) relationships with specific customers and/or customer
groups, and the integration of processes across the many areas of the firm and across the
network of firms that collaborate to generate customer value” (p. 6).Recently there has been
an increasing acknowledgement of the important of cross-functional processes in CRM – a
perspective on CRM strongly endorsed by Boulding et al. (2005). This inter-functional
coordination and customer orientation is highlighted in an increasing body of work on market
orientation (e.g. Kohli and Jaworski, 1990). However, much of the literature on CRM has
under-emphasised its cross-functional nature and we posit this is a neglected and critical
component of CRM that should form part of any CRM strategy and implementation model.

CRM strategy and processes

Grabner-Kraeuter and Moedritscher (2002) point to the lack of an adequate CRM strategic
framework from which to define success as being a reason for the disappointing results of
many CRM initiatives. A number of authors have proposed CRM strategy frameworks. Buttle
(2001) provides a CRM value chain that identifies a series of ‘primary stages’: customer
portfolio analysis; customer intimacy; network development; value proposition development;
and manage the relationship. It also identifies a series of ‘supporting conditions’ including:
culture and leadership; procurement processes; human resource management processes;
IT/data management processes; and organisation design. This is helpful as it considers
implementation issues. Sue and Morin (2001) develop a framework for CRM based on
initiatives, expected results and contributions. 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 customer targeting; how to build
relationships with the targeted customers; privacy issues; and metrics for measuring the
success of the CRM program. All these frameworks provide some useful insights, however
none appear to adopt an explicit cross-functional process-based conceptualization. Payne and
Frow (2005) used an expert panel of executives with extensive experience within the CRM
and IT sectors to identify specific cross-functional processes. They identify five CRM
processes including: strategy development; value creation; multi-channel integration;
information management; and performance assessment. This approach, used because of its

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specific cross-functional process focus, formed the basis of the process elements used in the
CRM strategy and implementation model developed in this paper.

Research Approach

This paper is part of a research programme into CRM that utilises learning from field-based
interactions with executives together with synthesis of relevant literature. This research
approach used Gummesson’s (2002a) ‘interaction research’ methodology which is based on
his view that interaction and communication play a crucial role in the stages of research; and
that testing concepts, ideas and results through interaction with different target groups of
managers form an integral part of the research process. It also draws on approaches used in
the work on ‘contemporary marketing practices’ (Coviello, et al., 2002). This interaction
research programme utilised the following: a group of 34 experienced executives
independently selected by the director of a leading European research and development
institute specializing in the CRM and IT sectors; interviews with 20 executives working in
CRM, marketing and IT roles in companies in the financial services sector; interviews with
six executives from large CRM vendors and with five executives from three CRM and
strategy consultancies; 35 workshops with 18 CRM vendors, analysts and their clients;
piloting the framework as a planning tool in two global organisations in the financial services
and automotive sectors; and using the framework as a planning tool in two companies – in
global telecommunications and global logistics - six workshops were held in each of the latter
companies.

A CRM Strategy and Implementation Model

In this section space permits only a brief overview of the model and its development. The
CRM strategy and implementation model used ‘interaction research’ and combined field-
based interactions, involving the executives groups outlined above, with insights from the
literature to identify four key implementation areas. These components were then
incorporated into a first preliminary model. This initial model, and the development of further
versions of it, was informed and further refined by interactions with the executive groups. The
framework went through several iterations and a number of minor revisions. The model has
two main components: four key CRM implementation elements and five cross-functional
CRM processes. The final version is shown in Figure 1. It represents an organizing model for
developing and implementing CRM which is recursive, rather than linear, in that its many
activities need to be managed concurrently and some elements will need to be revisited as a
consequence of later activities. Its components are now summarised.

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Figure 1: CRM Strategy and Implementation Model

CRM Readiness Assessment

Process 1: Strategy Development

ENABLING PROCESSES

Process 2: 3: Multi-Channel Integration

Process Process 4:

CRM Change
CRM Project

Value Creation Information Management

Employee Engagement

Process 5: Performance Assessment

Core cross-functional processes

Figure 1 outlines the five cross-functional processes, which include:
The strategy development process: The strategy development process has a dual focus on the
organisation’s business strategy and its customer strategy. This process not only shapes the
nature of the other four key CRM processes but, more importantly, it defines the overall
objectives and parameters for the organization’s CRM activities.
The value creation process: The value creation process is concerned with transforming the
outputs of the strategy development process into programmes that both extract and deliver
and co-produce (or co-create) value.
The multi-channel integration process: The multi-channel integration process starts with the
identification of the most appropriate channel options for specific segments; and is then
concerned with creating an outstanding customer experience within and across all channels.
The information management process: The information management process is concerned
with the collection and collation of customer information from all customer contact points;
and gaining customer insight that can be used to enhance the quality of the customer
experience.
The performance assessment process: The performance assessment process ensures that the
organisation’s strategic CRM objectives are being delivered to an appropriate and standard.

Key implementation elements

Figure 1 shows the four critical implementation elements of a successful CRM programme
identified during the interaction research. We now review these four elements - CRM
readiness assessment, CRM change management, CRM project management, and employee
engagement - that need to come together to support the organisation and implementation of a
CRM strategy.
CRM readiness assessment: A CRM readiness assessment helps the CRM sponsors and
leaders assess the overall position in terms of readiness to progress with CRM initiatives and
to identify how well developed their organisation is relative to other companies. Research has
shown that there are identifiable stages of maturity in CRM development (e.g. Ryals and
Payne, 2001); with each stage representing a level of CRM maturity characterised by the
extent to which customer information is used to enhance the customer experience and
customer-generated cash flows. If an organisation is in the early stages of CRM development,

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it may be useful to start with an overview audit to help get senior management understanding
and buy-in at an early stage. The overview form of readiness audit can be used to quickly
form an initial view on the key CRM priorities, to define the relative importance of these
priorities and to determine where effort needs to be applied. Firms that are more advanced can
consider a more comprehensive CRM audit such as one that we are currently testing as part of
our broader CRM research programme.
CRM change management: To implement a large-scale and complex CRM initiative,
companies will typically have to undergo substantial organisational and cultural change. A
critical dimension of any large CRM programme, therefore, is an effective change
management programme. (We make a distinction here between change management which is
concerned with strategic organisational change and employee engagement which we view as a
more operationally-oriented set of activities. These activities are, however, closely entwined.)
There are a number of potential obstacles to this transition, not least the entrenched interest in
preserving the status quo. Understanding and acting on change management requirements is
therefore a prerequisite to successful CRM implementation. A change management
framework such as the ‘Seven S’ framework (Peters, 1984) can be a useful tool to help the
organisation identify those issues relevant to their particular context. We found lack of
attention to this area a common theme in companies.
CRM project management: Whilst change management is needed for virtually all CRM
initiatives regardless of the scale of the CRM initiative, project management has increasing
relevance as the size and complexity of CRM initiatives increase. Effective CRM project
management is essential and our interviewees emphasised that CRM projects which overrun
budgets and timescales create considerable damage to CRM credibility. In our research we
identified several companies using the Benefits Dependency Network framework (e.g.
Wilson, et al. 2000); this works backwards from the project’s objectives to ensure that all
necessary business changes are made, as well as CRM technology solutions implemented.
Some organisations we interviewed were adopting a large-scale and very comprehensive
approach to CRM implementation. However, others we interviewed had found that an
incremental and modular approach to CRM development or enhancement was more
appropriate. These latter companies typically engaged in a series of smaller individual CRM
projects, undertaken in an appropriate sequence, each with clearly defined objectives and ROI
outcomes. These projects varied in the emphasis placed on analytical CRM, operational CRM
and collaborative CRM.
Employee engagement: The last of the four implementation elements is the engagement of
employees to support the various initiatives that comprise the overall CRM programme.
Employees have a crucial role to play within each of the CRM processes and implementation
activities outlined in this paper. Change management and project management are
particularly dependent on engagement of employees for their success. Ensuring the delivery
of a superior customer experience during times of unexpectedly high demand requires the
active engagement and commitment of all customer-facing staff and is a hallmark of a well-
planned CRM implementation. Interviewees stated that employee engagement is now
receiving greater attention as their companies place more focus on creating outstanding
customer experiences.

Discussion

This paper is a response to the call by Zablah, Beuenger and Johnston (2003) that further
exploration of CRM is desperately needed, and also our experience, during fieldwork, of the
confusion and problems that many companies experience in their efforts to implement CRM.
We now briefly discuss some managerial applications of our work. Future research

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opportunities in CRM have recently been examined in some detail in a paper by Boulding et
al. (2005) so we do not repeat these here. However, first we identify some limitations to this
work. First, our research was based on large industrial companies as it is in such companies,
because of their complexity, that CRM is likely to have the greatest positive impact. Second,
we did not explore the application of CRM strategy in non-business areas such as the
government and not-for-profit sectors. Third, we have not attempted to identify highly
specific components of CRM that may assume strategic importance in particular industry
settings. Finally, our attention was on enterprises seeking to develop strong relationships with
their customers. There may be different aspects to be considered in companies adopting more
transactionally-oriented approaches.

Different companies, according to their specific circumstances, will have different CRM
issues they need to address. This CRM strategy and implementation model has been used in
companies in a number of ways. For example, it has been used to plan the key components of
a CRM strategy and highlight which implementation issues and processes need greatest
attention in a large UK service company. It has also been used to undertake CRM
benchmarking - a large financial services company used this model to benchmark six US
companies considered to be world-class CRM leaders within the financial services sector. It
can also be used to help create a platform for change. In one large logistics company, this
model was used with over 100 of its senior staff in a series of workshops. Working in small
groups, managers provided a team score in terms of their perception of the company’s
existing and desired capabilities. The findings from the eighteen groups were very consistent
regarding problems; key areas for action were identified and a critical mass of executives,
who shared a common perspective, undertook responsibility for implementing a major change
management programme. Finally, the model has proved useful in helping identify very
specific problems. For example, in planning a CRM program in a large auto company, use of
the model surfaced particular integration problems between business and customer strategy
and made them highly visible within the company; this led to actions being taken to address
them.

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