CHAPTER 4

STRATEGIC CUSTOMER
RELATIONSHIP
MANAGEMENT

McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
 CUSTOMER RELATIONSHIP MANAGEMENT
 CRM is a cross-functional core business
process concerned with achieving
improved shareholder value through the
development of effective relationships
with key customers and customer
segments. CRM Recognizes That
Customers:

 Vary in their economic value

to the company
 Differ in their expectations
toward the firm
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 Competitive Advantage

* Delivers superior customer value by

personalizing the interaction between the
customer and the company.
* Demonstrate the company’s
trustworthiness.
* Tighten connection with the customer
* Achieve the coordination of complex
organizational capabilities around
customers.
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 Main Elements of CRM

* Identifying, satisfying, retaining and

maximizing value of firms best
customers.
* Wrapping around the customers to
ensure each contact.
* Creating a full picture of customer.

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 4-3

CUSTOMER LIFETIME VALUE

Customer lifetime value (CLV) calculates past profit
produced by the customer for the firm – the sum
of all the margins of all the products purchased
over time, less the cost of reaching that customer
 To this is added a forecast of margins on
future purchases (under different assumptions
for different customers), discounted back to
their present value.
 This process provides an estimate of the
profitability of a customer during the time
span of the relationship.
 The CLV calculation is a powerful tool for
focusing marketing and promotional efforts
where they will be most productive.
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PIVOTAL ROLE OF CUSTOMER RELATIONSHIP MANAGEMENT

DEVELOPING A CRM STRATEGY

 CRM Levels
 CRM Strategy Development
 CRM Implementation
VALUE CREATION PROCESS
 Customer Value
 Value Received by the Organization
 CRM and Value Chain Strategy
CRM AND STRATEGIC MARKETING
 Implementation
 Performance Metrics
 Short-Term Versus Long-Term Value
 Competitive Differentiation
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 4-4

PERSPECTIVES TOWARD CRM

STRATEGIC-
THE ENTIRE
COMPANY

REQUIRED THE CUSTOMER

MARKETING
FUNCTIONS

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CRM Strategy Development

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 4-6

DEFINE THE CRM STRATEGY

Value
Proposition
1

5 2
Other Business
Stakeholders CRM Case
STRATEGY

Enterprise 4 3 Customer
Transformation Plan Strategy

Source: V. Kumar and Werner J. Reinartz, Customer Relationship Management (Hoboken, NJ: John Wiley & sons, Inc.), 2006,
42.

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 4-7

IMPLEMENTATION DANGERS
 Implementing Without Developing a
Customer Strategy

 Failing to Initiate Necessary

Organizational Change

 Allowing Technology to Dominate the

CRM Process

 Focusing on the Wrong Customers

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 4-8

VALUE CREATION PROCESS

Value Received by Value Received by the
the Customer Organization

THE VALUE EXCHANGE

Successful Value
Exchange

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 4-9

METRICS
FEATURE How General Electric Co. Measures Customers’
Experience
Happy (And Not-So-Happy) Customers
General Electric is a big user of the “Net Promoter” concept of customer
satisfaction, popularized by Fred Reichheld of Bain & Co. Below, questions
similar to those on which GE’s Capital Solutions unit asks customers to rate the
unit’s performance on a 0 – 10 scale.
• How willing are you to recommend us to a friend or
associate?
• How would you rate our ability to meet your needs?
• How would you rate our people?
• How would you rate our processes?
• What is your impression of our market reputation?
• How would you rate the cost of doing business with us?
• How would you rate the overall value of our product or
service as being worth what you paid?
Source: Kathryn Kranhold, “Client-Satisfaction Tool Takes Root,” The Wall Street Journal, July 10, 2006, B3. 4-12
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CRM AND VALUE CHAIN STRATEGY

The Perfect Customer Experience
“The perfect customer experience, which must be affordable for the
company in the context of the segments in which it operates and its
competition, is a relatively new concept. This concept is now being
embraced in industry by companies such as TNT, Toyota’s Lexus,
Oce, and Guinness Breweries, but it has yet to receive much
attention in the academic literature. Therefore, multi-channel
integration is a critical process in CRM because it represents the point
of co-creation of customer value. However, a company’s ability to
execute multi-channel integration successfully is heavily dependent
on the organization’s ability to gather and deploy customer
information, from all channels and to integrate it with other relevant
information.”
Adrian Payne and Pennie Frow, “A Strategic Framework for Customer Relationship Management,” Journal of Marketing (October 2005),
173.

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 4-11

CRM AND STRATEGIC MARKETING

CRM STRATEGIC
MARKETING

From the perspective of strategic marketing, there are several

reasons why CRM is important and why there should be extensive
marketing involvement in decisions about CRM. Importantly, an
organizational perspective is needed in guiding the CRM strategy.

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