2010.11.15.

Aligning Business Strategy and Customer Strategy

CRM Strategy Development

1. Business Strategy
Business strategy Customer strategy
CRM = Business strategy
CRM is not about developing a business strategy.
Important: it is crucial for the CRM activities to be aligned
with and supportive of an appropriate business strategy.
Virtually all companies have a business strategy: implicit-
(guiding strategy for the top management) or explicit
(greater chance of long-term success) strategy.
Companies have to define clearly their business vision and
formulate a business strategy that takes full account of the
competitive characteristics within the areas in wich they
have chosen to operate.

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Business Vision

The business vision should explicitly reflect the basic
beliefs, values, and aspirations of the organization.

A business vision should be an enduring statementof
purpose that distinguishes the organization from its
competitors and it should act as an important device
for coordinating activity in an organization.

A companys business vision should reflect the shared
value systems which are held within the organization.

Vision statements need not be long and platitudinous.

Mission??
Mission
The key questions and terms are:

What are we here for? Purpose

What is our long-term destination? Vision

What beliefs and behaviours will guide us on the journey? Values
For example: The Goldman Sachs Company
Purpose/mission: To provide excellent investment and development advice
for major companies.
Vision: To the worlds premier investment bank i every sector
Values:

Client first,

Teamwork.

The business vision and its associated values form an important element
of companys strategy. Competitive advantge is difficult to create and
sustain.
The vision and values are often developed the wrong way: the customer
is king, lets be customer focused.

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Seven best practices in making vision and values

work (Davidson)
1. Building foundations: Needs of key steakholders understood
and linked throught vision and values,
2. Strong vision: Vision is memorable, clear, motivating,
ambitious, customers related and translated into mesaurable
strategies,
3. Strong values: Values support the vision, are based on key
factors for success and turned into measurable practices,
4. Communication: Consistent communication by action,
signals, words,
5. Embedding: Recruitment, training, appraisal, rewards,
promotion and succession , all reflect values,
6. Branding: Organizations branding expressesvision and
values,
7. Measurement: Rigorous measurement of how effectively
vision and values are implemented .

The generic strategies framework

Porter: This approach suggests a choice of one of three generic
strategies is appropriate for a given business. The three strategies
include:

Cost leadership strategy
(requires a company to set out with the objective of being the
lowest cost producer in the industry)

Differentiation
(the firm seeks to be different within the industry it is operating
in by being unique on some dimension or set of dimensions of
value to buyers)

Focus strategy
(involves concentrating on a particular buyer group, georaphic
area or product/market segment to serving the needs of the
most important segment better than the competition)

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The market leaders framework

(Michael Treacy Fred Wiersema
Wiersema))
This disciplines of market leaders framework suggest three
broad business strategies:

Operational excellence
(providing customers with reliable products or services at
competitive prices, delivered with minimal difficulty or
inconvenience)

Product leadership
(providing products that continually redefine the state of
the art)

Customer intimacy
(selling the customer a total solution not just a product or
service)

Operational excellence
Lean--thinking
Lean
Organizations seeking to follow discipline of operational
excellence need to have an internal culture that it based on
lean-thinking. This involves focusing on continuing
improvement, multi-skilling and all those CRM activities
that lead to greater internal efficiency. Equally, significant
emphasis must be placed upon developing superior
supplier relationships since, for many organizations, the
cost of materials and supplies is a major proportion of total
cost. By working more closely with suppliers many
opportunities for cost reduction and quality improvements
can usually be indentified.
In terms of CRM, customer intimacy strategies are especially
appropriate.

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Focusing on business strategy

The objective of addressing business strategy, as part of the
strategy development process in CRM, is to determine how
the enterprises customer strategy should be developed or
extended and how it will envolve in the future. For
companies with a clear and appropriate business strategy, a
review of it will help ensure the resulting customer strategy
is properly focused.
The business strategy should be developed into specific
actions that will lead to its implementationand the
achievement of its objectives.
The successfull strategy will be one in which the company
differentiates itself from its competitors .

2. Customer strategy
Increasing competition

Few firms can successfully be

all things to all people

Distinctive customer strategy

To survive

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The role of customer strategy

Customer strategy is typically the responsibility of the
marketing department.

Important: marketing and CRM require a cross-
functional or pan-company approach.

Customer strategy involves examining your existing
and potential customers and identifying which forms
of segmentation are most appropriate.

Who is the customer?

The customer may include three broad groups:

Direct buyers

Intermediaries

Final consumers
We can use the term customer generally to apply to all
these groups.
All of them are customers, and the company needs to
balance the amount of time, money and effort that
should be directed at each group.

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Market segmentation
Market segmentation is essential for the successful
development of a customer strategy.
Market segmentation involves dividing a total market up
into a series of sub-markets (or market segments)
based on customer characteristics.
The market segmentation exercise involves the following
steps:

Defining the relevant market to be addressed

Determining the criteria for market segment viability

Considering the alternative bases for segmentation

Choosing specific segments to focus on

Definition of the relevant market

The definition of the relevant market to be addressed involves specifying
the broad customer group at which the company is seeking to market
its products or services. The organization needs to consider its
strengths and weaknesses and review the resources which are available
to it.
The choice of the market to be addressed or served market will be based
around decisions relating to:

The breadth of the service line

The types of customers

The geographic scope

The areas of value added in which the service firm decides to operate.
Successful market segmentation means satisfying the needs of existing
and potential customers in a clearly defined market .

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Experienced observers of industry, be they managers,

consultants or academics, will have their own examples
of instances where business strategy and customer
strategy are not clearly aligned or where they come into
conflict.

CRM strategy development

Business and customer strategy represent the major
components of CRM strategy. The organization needs to
consider its current position within its industry and the
future role it realistically can play within it.
Central to this will be making decisions about customer
choice, customer characteristics and segment granularity.
This includes determining the extent to which
individualized customer, or one-to-one, approach is
appropriate and affordable for the enterprise and
deteremining the completeness of customer information
that exist and is potentially available. Such decisions
should be based on both the present situation and the
possible situation in the future.

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The CRM strategy matrix

The envolving nature of the competitive situation and
the likely costs inherent in creating change need to be
carefully assessed as part of the CRM strategy
development process.
The CRM strategy matrix provides a tool for considering
a companys present and future circumstances.

The CRM strategy matrix

High
Customer
Individualized
based
Completeness CRM
marketing
of
customer Moderate
infromation
Managed
Product based
service and
selling
support

Low

Low Moderate High

Degree of customer individualization

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Product based selling

At the buttom left hand position of the CRM strategy matrix is
product based selling. Here the organization has information
about transactions and wishes to do simple analysis of variables
such as product sales over time and channel productivity. There
may be a customer mailing list, but there is probably little or no
detailed information on individual customers.
To improve marketing using:

Simple mailing list analysis

Elementary segmentation based on product or channels

Simple query and reporting for sales productivity and channel
productivity.
The emphasis is on product and channels, not on the customers.
The level of sophistication in terms of CRM is fairly low.

Managed service and support

On the bottom right-hand corner of the matrix is managed service
and support. In practice, most companies tend to move from
product-based selling to managed service and support as their
first extension of CRM by setting up a call centre or help desk.
Here the business is seeking both to identify which specific
customers it wishes to retain and to place greater emphasis on its
most important customer.
applying customer service to selling
This form of CRM does not need comprehensive information on
customers, but the communication is person to person or
individualized. Applications include:

Contact centres/help desks

Telemarketing

Contact management

Sales force automation

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Customer--based marketing
Customer
In the top left-hand corner of the matrix is customer-based marketing.
Organizations undertaking customer-based marketing now shift their
emphasis from individual product sales to a focus on the customer.
Here the organization seeks to develop a more detailed understanding
of its customer.
Analyses:

Customer profitability

Competitor responses

Loyalty and churn management

Credit scoring

Customer loyalty

Fraud detection and management

Risk management

Deliquency detection

Individualized CRM
In the top right-hand corner of the matrix.
This usually requires both sophisticated data platforms
and sophisticated applications running on them.
Such applications include:

Advanced one-to-one marketing

Advanced computer telephony integration

Multi-channel integration

Advanced web services and Internet

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Migration paths for CRM

Some organizations have already successfuly implemeted
managed service and support or customer based
marketing. Many companies still need to develop from the
position of product-based selling.
Organizations starting with product-based selling will
depent heavily upon the specific industry and business
issues outlined earlier. They need to look forward in time
to see what business benefits would be realizable through a
more advanced form of CRM.
The choice of migration paths from product-based selling
will depend heavily upon the specific industry and
business issues outlined earlier.

In some cases the transition will emphasize building

increase customer intimacy through elements suchas
call centres and computer telephony integration.

In other cases, it will involve developing greater
database completeness and exploiting clearly targeted
but relatively simple marketing approaches. This latter
path focuses on improving quality, management and
utilization of data.

In many isdustries there will ultimately be
oppotunities to shift towards one-to-one applications
through individualized CRM.

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Those organizations wishing to adopt one-to-one

marketing applications may do so by migrating from
customer-based marketing.

RS components is an example of the latter taransition. A
few organizations may undertake a more radical
transformation directly from transaction-based selling to
individualized relationship marketing.

This radical shift will be easier for a strat-up or smaller
company without existing investment in legacy systems, or
an organization that has strong leadership and is willing to
undertake heavy investment to make a range of different
and new initiatives work together concurrently.
The organization will need to choose technology solutions
that enable it to grow from one position on the CRM matrix
to another without undue difficulty.

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