A Strategic Framework for Customer Relationship Management

Author(s): Adrian Payne and Pennie Frow

Source: Journal of Marketing, Vol. 69, No. 4 (Oct., 2005), pp. 167-176
Published by: American Marketing Association
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 AdrianPayne & Pennie Frow

A Strategic
FrameworkforCustomer
Relationship
Management
In this article,the authors develop a conceptual frameworkforcustomer relationshipmanagement (CRM) that
helps broaden the understandingof CRM and its role in enhancingcustomervalue and, as a result,shareholder
value. The authorsexplore definitional aspects of CRM, and theyidentifythree alternativeperspectivesof CRM.
The authorsemphasize the need fora cross-functional, process-orientedapproach thatpositionsCRM at a strate-
gic level.They identifyfivekeycross-functional CRM processes: a strategydevelopmentprocess, a value creation
process, a multichannel process,
integration an informationmanagementprocess, and a performanceassessment
process. They develop a new conceptual framework based on these processes and explorethe role and function
of each element in the framework. The synthesisof the diverse concepts withinthe literatureon CRM and rela-
tionshipmarketingintoa single, process-based framework should providedeeper insightintoachievingsuccess
withCRM strategyand implementation.

ver thepastdecade,therehas been an explosionof cize theseverelack of CRM researchthattakesa broader,

interestin customerrelationshipmanagement morestrategic focus.The articledoes not explorepeople
(CRM) by both academicsand executives.How- issuesrelatedto CRM implementation. Customerrelation-
ever,despitean increasingamountof publishedmaterial, ship managementcan fail when a limitednumberof
mostof whichis practitioner thereremainsa lack
oriented, employeesare committed to theinitiative;
thus,employee
of agreement aboutwhatCRM is and how CRM strategy engagement andchangemanagement areessentialissuesin
should be developed.The purposeof this articleis to CRM implementation. In our discussion,we emphasize
developa process-oriented conceptualframework thatposi- suchimplementation andpeopleissuesas a priorityareafor
tionsCRM at a strategic levelby identifying thekeycross- furtherresearch.
functional processesinvolvedin thedevelopment of CRM
strategy. More the
specifically, aims of thisarticle
are
.To identifyalternative ofCRM,
CRM Perspectives and Definition
perspectives The term"customer
.Toemphasize theimportance ofa strategic toCRM relationship management" emergedin
approach the information vendor and
withina holistic context,
organizational technology(IT) community
.To proposefivekeygeneric cross-functional that practitioner community in the mid-1990s. It is often used to
processes
organizations can use to developand deliveran effective describetechnology-based customer solutions, such as sales
CRMstrategy, and forceautomation (SFA). In the academiccommunity, the
.To developa process-based conceptualframework forCRM terms"relationship marketing" and CRM are often used
strategydevelopment andtoreview theroleandcomponents interchangeably (Parvatiyarand Sheth 2001). However,
ofeachprocess. CRM is morecommonly used in thecontextof technology
We organizethisarticlein threemainparts.First,we solutions and has been described as "information-enabled
relationship marketing" (Ryals and Payne 2001, p. 3).
exploretheroleof CRM and identify threealternative per-
Zablah, Beuenger, and Johnston (2003, p. 116) suggestthat
spectivesof CRM. Second, we considerthe need for a
cross-functional CRM is "a philosophically-related offspring to relationship
process-basedapproach to CRM. We
marketing which is forthe most part neglected in thelitera-
developcriteriaforprocessselectionand identify fivekey
CRM processes.Third,we proposea strategic ture," and theyconclude that "further exploration of CRM
conceptual and its related is
framework thatis constructed of thesefiveprocessesand phenomena not only warranted butalso
examinethecomponents ofeachprocess. desperately needed."
The development of thisframework is a responseto a A significant problemthatmanyorganizations deciding
and to adopt CRM face stems from the great deal of confusion
challengebyReinartz, Krafft, Hoyer(2004), whocriti-
aboutwhatconstitutes CRM. In interviews withexecutives,
whichformed part of our research process(we describethis
AdrianPayneis Professor
ofServices
and Relationship
Marketing and process subsequently), we found a wide rangeof views
Director
oftheCentre forCRM(e-mail: and
a.payne@cranfield.ac.uk), aboutwhatCRM means.To some,it meantdirectmail,a
PennieFrowisVisiting
FellowinMarketing
(e-mail:
p.frow@cranfield.ac.
loyaltycard scheme,or a database,whereasothersenvi-
uk),Cranfield
SchoolofManagement, Cranfield Theauthors sionedit as a
University. help desk or a call center.Some said thatit
thefinancial
acknowledge ofBTplcandSASwith
support thisresearch,
andtheythankthethree JMreviewers was about populating a datawarehouseor undertaking data
anonymous andtheconsultingedi-
tors
fortheir comments
helpful onpreviousversions
ofthisarticle. mining; othersconsidered CRM an e-commerce solution,
suchas theuse of a personalization engineon theInternet

(c)2005,American Association
Marketing Journal ofMarketing
ISSN:0022-2429 1547-7185
(print), (electronic) 167 Vol.69 (October
2005),167-176

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or a relationaldatabasefor SFA. This lack of a widely (1997), Singhand Agrawal(2003), and Swift(2000). Fol-
acceptedand appropriate definition of CRM can contribute lowing this phase of our work,we identifiedZablah,
to thefailureofa CRM projectwhenan organization views Beuenger,andJohnston's (2003) research, whichsupported
CRM froma limitedtechnology perspective or undertakes ourviewoftheseperspectives.
CRM on a fragmented basis. The importance of how CRM is definedis notmerely
The definitionsand descriptions of CRM thatdifferent semantic.Its definitionsignificantly affectsthe way an
authorsand authorities use varyconsiderably, signifying a entireorganizationaccepts and practicesCRM. From a
varietyof CRM viewpoints. To identify alternative perspec- strategicviewpoint, CRM is notsimplyan IT solutionthat
tivesofCRM, we considered definitions anddescriptions of is used to acquireand growa customer base; it involvesa
CRM froma rangeof sources,whichwe summarize in the of
profoundsynthesis strategic vision; a corporateunder-
Appendix.We excludedother,similardefinitions fromthis standing of the nature of customer value in a multichannel
list. environment; theutilization of theappropriate information
An important aspect of the CRM definition thatwe management and CRM and
applications; high-quality oper-
wantedto examinewas its associationwithtechnology. ations,fulfillment, and service.Thus,we proposethatin
This is importantbecauseCRM technology is oftenincor- anyorganization, CRM shouldbe positionedin thebroad
rectlyequated with CRM (Reinartz,Krafft,and Hoyer strategiccontext of Perspective 3.
2004), and a keyreasonforCRM failureis viewingCRM Swift(2000) argues,and we concur,thatorganizations
as a technology initiative(Kale 2004). For thisreason,we willbenefitfromadoptinga relevantstrategic CRM defini-
reviewthedefinitions intheAppendixwithspecialattention tionfortheirfirmandensuring itsconsistent use throughout
to theiremphasison technology. This reviewsuggeststhat theirorganization. Thus,we developeda definition ofCRM
CRM can be definedfromat leastthreeperspectives: nar- thatreflected 3. We examinedtheCRM litera-
Perspective
rowly and tacticallyas a particulartechnology solution, ture,synthesized aspectsof the variousdefinitions intoa
wide-ranging technology; and customercentric.Theseper- draftdefinition, andthentesteditwithpracticing managers.
spectivescan be portrayed as a continuum (see Figure1). As ourresearchprogressed, we wentthrough severalitera-
One organizationwe interviewed, which spentmore tions.The resultis thefollowingdefinition, whichwe use
than$30 millionon IT solutionsand systemsintegration, forthepurposesofthisstudy:
describedCRM solelyin termsof its SFA project.At this
extreme, CRM is definednarrowly and tacticallyas a par- CRMis a strategic approach thatis concerned withcreat-
ingimproved shareholder valuethrough thedevelopment
ticulartechnologysolution(e.g., Khanna2001). We call
ofappropriate relationshipswithkeycustomers andcus-
thisCRM "Perspective 1." Otherdefinitions, suchas thatof tomer CRMunites thepotential ofrelationship
segments.
Kutnerand Cripps(1997), thoughsomewhatbroader,also marketing strategiesandIT tocreate profitable,
long-term
fallintothiscategory. relationshipswithcustomers andother keystakeholders.
In anotherorganization thatwe interviewed, the term CRM provides enhanced opportunities to use dataand
CRM was used to referto a wide range of customer- information to bothunderstand customers andcocreate
orientedIT and Internetsolutions,reflecting Stone and valuewiththem. Thisrequires a cross-functionalintegra-
Woodcock's(2001) definition. Thisrepresented CRM "Per- tionofprocesses, people,operations,andmarketing capa-
bilitiesthatis enabledthrough information, technology,
spective2," a pointnearthemiddleofthecontinuum. andapplications.
"Perspective3" reflectsa more strategicand holistic
approachto CRM thatemphasizesthe selectivemanage- This definitionprovidedguidance for our subsequent
mentof customer relationships to createshareholder value. research considerationsand the strategicand cross-
This reflectselementsof severalpreviouslynoteddefini- functionalemphasis of the conceptual frameworkwe
tions of CRM, includingthose of Buttle(2001), Glazer developed.

FIGURE 1
The CRM Continuum

CRM Defined CRM Defined

Narrowly Broadly and
and Tactically Strategically

CRM is about the CRM is the CRM is a holistic

implementation ofa implementation ofan approach to managing
specifictechnology integratedseries of customerrelationships
solutionproject. customer-oriented to create shareholder
technologysolutions. value.

ofMarketing,
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Processes: A StrategicPerspective cross-functional conceptualization of CRM. For example,
Sue and Morin(2001, p. 6) outlinea framework forCRM
Gartner(2001) calls fora freshapproachto businesspro-
basedon initiatives, and
expectedresults, contributions, but
cessesin CRM thatinvolvesbothrethinking howthesepro-
this is not processbased, and "manyinitiativesare not
cesses appearto thecustomer andreengineering themto be
explicitly in theframework."
identified Winer(2001, p. 91)
morecustomer centric.Kale (2004) supports thisviewand
develops a "basic model, which contains a set of 7 basic
arguesthata criticalaspectofCRM involvesidentifying all
a databaseof customer
strategicprocesses that take place between an enterprise
components: activity;analysesof
and its customers. To addressthischallengeof adoptinga thedatabase;giventheanalyses,decisionsaboutwhichcus-
freshapproachto CRM processes,we aimedto identify tomersto target;toolsfortargeting thecustomers; how to
the
build relationships withthe targetedcustomers;privacy
keygenericprocesses relevantto CRM.
We examinedtheliterature to identify crite- issues;and metricsformeasuring thesuccessof theCRM
appropriate
ria forprocessselectionbutfoundlittleworkin thisarea, program." Again,thismodel,thoughuseful,is nota cross-
withtheexceptionof thecontribution Sher- functional process-basedconceptualization. This gap in the
by Srivastava, literature
vani,andFahey(1999),whoestablishfourprocessselection suggeststhatthereis a needfora new systematic
criteriaformarketing andbusinessprocesses.We chosetheir process-basedCRM strategy framework. Synthesisof the
workas a starting diverseconceptsin theliterature on CRM and relationship
pointforthe identification of process
selectioncriteriaforCRM. The criteriatheseauthorspro- marketing intoa single,process-basedframework should
providepracticalinsights to helpcompaniesachievegreater
pose are as follows:First,theprocessesshouldcomprisea
smallsetthataddressestaskscriticalto theachievement of successwithCRM strategy development andimplementation.
an organization's goals. Second,each processshouldcon-
tributeto the value creationprocess.Third,each process Interaction Research
shouldbe ata strategic ormacrolevel.Fourth, theprocesses Conceptualframeworks and theoryare typicallybased on
needto manifest clearinterrelationships. combiningpreviousliterature, commonsense,and experi-
As partof ourresearch, we conducteda workshop with ence (Eisenhardt1989). In thisresearch,we integrated a
a panelof 34 highlyexperienced CRM practitioners, all of synthesisof the literaturewithlearningfromfield-based
whomhadextensive experience in theCRM andIT sectors. interactionswithexecutives to developandrefinetheCRM
The director ofa leadingresearchandmanagement institute strategyframework.In this approach, we used what
specializingin theCRM and IT sectorsselectedthepanel. Gummesson(2002a) terms"interactionresearch."This
Participants were selectedon the basis of the following formof researchoriginates fromhis viewthat"interaction
attributes to ensurethattheywere knowledgeableabout and communication play a crucialrole" in the stagesof
CRM, its implementation, and its operation:substantial researchand that testingconcepts, ideas, and results
management and industrial experience(average of 17.2 through interactionwithdifferent targetgroupsis "an inte-
years),maturity (averageage of 40.2 years),international gral part of the whole researchprocess" (p. 345). The
and
representation international experience(managersfrom sourcesforthesefield-based insights,whichincludeexecu-
nine countriesattended;most of themhad international tivesprimarily fromlarge enterprises in the business-to-
experience), and academicqualifications (degreeor equiva- businessand business-to-consumer sectors,includedthe
lent).In the firstpartof theworkshop, which involvedsmall following:
the
groupsessions, panel reviewed and subsequently unani- 'Anexpert panelof34 highly experienced executives;
mouslyagreed thatthese four criteria
were fullyappropriate 'Interviewswith20 executives working in CRM,marketing,
forselectingCRM processes.However,theyalso proposed andIT rolesincompanies inthefinancial services
sector;
two further criteria:First,each processshouldbe cross-
'Interviewswithsixexecutives fromlargeCRMvendors and
functional in nature,and second,each processwould be with five executivesfromthreeCRM and strategy
consideredby experienced practitionersas beingbothlogi- consultancies;
cal andbeneficialto understanding anddevelopingstrategic 'Individualandgroupdiscussions withCRM,marketing, and
CRM activities.We used these six criteriato select key IT managers at workshops with18 CRM vendors, analysts,
genericCRM processes. andtheirclients,including Accenture, Baan,BroadVision,
Chordiant,EDS, E.piphany, Hewlett-Packard,
IBM,Gartner,
NCR Teradata,Peoplesoft, Oracle,SAP, SAS Institute,
A ConceptualFramework
forCRM Siebel,Sybase,andUnisys;
Grabner-Kraeuter andMoedritscher (2002) suggestthatthe 'Pilotingtheframeworkas a planningtoolinthefinancial
ser-
absenceof a strategicframework forCRM fromwhichto vicesandautomotivesectors; and
definesuccessis one reasonforthedisappointing resultsof 'Usingtheframework as a planning toolin twocompanies:
manyCRM initiatives. Thisviewwas supported bothbythe globaltelecommunications and globallogistics.
Six work-
seniorexecutiveswe interviewed shopswereheldineachcompany.
duringour researchand
by Gartner's(2001) research.Our nextchallengeswereto
Process Identificationand the CRM Framework
identifykey genericCRM processesusingthepreviously
describedselectioncriteriaandto developthemintoa con- We beganby identifying possiblegenericCRM processes
ceptualframework forCRM strategy development. fromtheCRM andrelatedbusinessliterature. We thendis-
Our literaturereviewfoundthatfewCRM frameworks cussed these tentativeprocesses interactively
with the
exist;thosethatdid werenotbased on a process-oriented groupsofexecutives.The outcomeofthisworkwas a short

A Strategic
Framework
forCRMI 169

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list of sevenprocesses.We thenused theexpertpanel of
experienced CRM executives whohad assistedin thedevel-
StrategyDevelopmentProcess
This processrequiresa dual focus on the organization's
opmentof the processselectionschemato nominatethe businessstrategyand its customerstrategy.
How well the
CRM processesthattheyconsidered important andto agree two interrelate affectsthe success of its
fundamentally
on thosethatwerethemostrelevantand generic.Afteran CRM strategy.
initialgroupworkshop, each panel memberindependently
completed a list representing his or her view of the key Business Strategy
genericprocessesthatmet the six previouslyagreed-on
The datawerefedbackto thisgroup,anda The businessstrategymustbe consideredfirstto determine
processcriteria.
detaileddiscussionfollowedto help confirmour under- howthecustomerstrategy shouldbe developedand how it
oftheprocesscategories. shouldevolveovertime.The businessstrategy processcan
standing commencewitha reviewor articulation of a company's
As a resultof thisinteractive method,fiveCRM pro-
cessesthatmettheselectioncriteria wereidentified; all five vision, especiallyas it relatesto CRM (e.g., Davidson
2002). Next, the industryand competitiveenvironment
were agreedon as important genericprocessesby more should be reviewed.Traditionalindustryanalysis (e.g.,
thantwo-thirds of the groupin the firstiteration. Subse-
of theseas key
Porter1980) shouldbe augmented by morecontemporary
quently,we receivedstrongconfirmation Christensen2001; Slaterand Olson 2002)
approaches(e.g.,
genericCRM processesby severalof theothergroupsof to includeco-opetition andNalebuff1997),
The resultant fivegenericprocesseswere(1) the (Brandenburger
managers. networks anddeeperenvironmental analysis(Achrol1997),
strategydevelopmentprocess, (2) the value creation and theimpactof disruptive technologies (Christensenand
process,(3) the multichannel integration process,(4) the Overdorf 2000).
information management process,and (5) theperformance
assessment process. Customer Strategy
We thenincorporated thesefivekeygenericCRM pro-
Thisinitial Whereasbusinessstrategy is usuallytheresponsibility of
cessesintoa preliminary conceptualframework.
framework and the developmentof subsequentversions thechiefexecutiveofficer, theboard,andthestrategy direc-
refinedby ourinterac- tor,customerstrategy is typicallytheresponsibility of the
werebothinformed by and further
tionswithtwoprimary executivegroups:mangersfromthe marketing department. AlthoughCRM requiresa cross-
functionalapproach,it is oftenvestedin functionally based
previouslynoted companies and executivesfromthree Whendifferent
CRM consultingfirms.Participantsat severalacademic roles,includingIT and marketing. depart-
mentsare involvedin the two areas of strategy develop-
conferenceson CRM and relationshipmarketingalso
assistedwithcomments andcriticisms ofpreviousversions. ment,specialemphasisshouldbe placed on thealignment
andintegration ofbusinessstrategy.
Withevolvingversionsof theframework, we combineda
Customerstrategy involvesexaminingtheexistingand
synthesis of relevant literaturewith field-based interactions
potentialcustomer base andidentifying whichformsofseg-
the
involving groups. The framework went through a con-
mentation are mostappropriate. partof thisprocess,the
As
siderablenumberof majoriterations and minorrevisions; for
organization needsto considerthelevel of subdivision
thefinalversionappearsin Figure2. customersegments, or segmentgranularity. This involves
Thisconceptualframework illustratestheinteractive set
decisionsaboutwhether a macro,micro,or one-to-one seg-
of strategicprocesses thatcommenceswith a detailed mentation is
approach appropriate (Rubin1997).
reviewof an organization's strategy (thestrategy develop- Several authorsemphasizethe potentialfor shifting
mentprocess)and concludeswithan improvement in busi- froma mass marketto an individualized, or one-to-one,
ness resultsand increasedshare value (the performance
marketing environment. Exploitinge-commerce opportuni-
assessmentprocess).The conceptthatcompetitive advan- ties and the fundamental economiccharacteristics of the
tage stems from the creation of value forthe customer and Internetcan enable a muchdeeperlevel of segmentation
forthe businessand associatedcocreationactivities(the thanis affordable in mostotherchannels(e.g.,
granularity
value creationprocess)is well developedin themarketing Peppersand Rogers1993, 1997). In summary, thestrategy
literature. For largecompanies,CRM activitywill involve processinvolvesa detailedassessment ofbusi-
development
collectingand intelligently usingcustomerand otherrele- ness strategy and the development of an appropriate cus-
vantdata (theinformation process)to builda consistently tomerstrategy. This shouldprovide the enterprise with a
superiorcustomerexperienceand enduringcustomerrela- clearerplatform to
on which develop and implement its
tionships(themultichannel integration process).The itera- CRM activities.
tivenatureof CRM strategy development is highlighted by
thearrowsbetweentheprocessesin bothdirections in Fig-
ure 2; they representinteractionand feedback loops ValueCreationProcess
betweenthedifferent processes.The circulararrowsin the The value creationprocesstransforms the outputsof the
value creationprocessreflectthe cocreationprocess.We strategydevelopment process into programs that both
now examinethe key componentswe identified in each extractand delivervalue. The threekey elementsof the
process. As with our prior work, we used the interaction whatvalue the
value creationprocessare (1) determining
researchmethodin the identification of these process companycan provideto itscustomer;(2) determiningwhat
components. valuethecompanycan receivesfromitscustomers; and (3)

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 valu( and
value
value
and
Process Results reduction performance office
Performance
Assessment Monitoring
Performance
Shareholder
measurement
?Standards key
qualitative
?Quantitative indicators
?Results Back
?Employer
?Customer
?Shareholder
?Cost applications

Intrigated channel management

office

Front Process
applications
Integration

Strategy Process force

marketing
Outlets Mobile Repository
Sales Telephony Electronic
commercecommerce Management
CRM Direct Data
Multichannel
2 for tools

Physical virtual
Information
Analysis
FIGURE
Framework
Customer segment lifetime value analysis

Conceptual vf4
A Creation
systems
Process IT
Customer assessment Value
Value Receives
Receives
Cocreation
Organization economics
economics
?Acquisition
?Retention
proposition
Value ?Value
?Value

vision choice granularity

and
Strategy
Process Business
Strategy Strategy
Customercustomer
Development
competitive
characteristics
?Business
?Industry andcharacteristics
?Customer
?Segment

A Strategic forCRM/171
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by successfullymanagingthis value exchange,which tomersand customersegments. The valuecreationprocess
involvesa processof cocreationor coproduction,
maximiz- is a crucialcomponent of CRM becauseit translates busi-
ingthelifetimevalue of customer
desirable segments. ness andcustomer into
strategies specific value proposition
statements thatdemonstratewhatvalueis to be deliveredto
The Value the Customer Receives customers, andthus,itexplainswhatvalueis to be received
by the including
organization, thepotentialforcocreation.
The value the customerreceives fromthe organization
drawson theconceptof thebenefitsthatenhancethecus-
tomeroffer(Levitt1969;Lovelock1995).However,thereis Multichannel IntegrationProcess
now a logic, whichhas evolvedfromearlierthinking in
business-to-business and servicesmarketing, thatviewsthe
The multichannel processis arguablyone ofthe
integration
customeras a cocreatorand coproducer(Bendapudiand
mostimportant processesin CRM becauseit takestheout-
putsof thebusinessstrategy and value creationprocesses
Leone 2003; Prahaladand Ramaswamy2004; Vargoand
themintovalue-addingactivitieswithcus-
and translates
Lusch 2004). These benefitscan be integrated in theform
tomers.However,thereis onlya smallamountofpublished
of a value proposition (e.g., Lanning and Michaels 1988;
workon themultichannel in CRM (e.g., Fried-
integration
Lanning and Phillips 1991) that explainsthe relationship manand Furey1999; Funk2002; Kraft2000; Sudharshan
amongtheperformance of the product,thefulfillment of
and Sanchez 1998; Wagner2000). The multichannel inte-
thecustomer's needs,andthetotalcosttothecustomer over
on
grationprocessfocuses decisions about what the most
thecustomer relationship lifecycle(Lanningand Michaels
appropriatecombinations of channelsto use are; how to
1988). Lanning's(1998) laterworkon value propositions ensurethatthecustomerexperienceshighlypositiveinter-
reflectsthe cocreationperspective.However, a more
actionswithinthosechannels;and whena customerinter-
detailedsynthesis of workin thisarea is neededin further
actswithmorethanone channel,howto createand present
research.
a singleunifiedviewofthecustomer.
To determine whether thevalueproposition is likelyto
resultin a superior customer experience, a companyshould
to quantifytherelativeimpor- Channel Options
undertake a valueassessment
tancethatcustomersplace on the variousattributes of a Today,manycompaniesenterthemarketthrough a hybrid
product.Analyticaltools such as conjointanalysiscan be channelmodel (Friedmanand Furey1999; Moriartyand
used to identify customers thatsharecommonpreferences Moran1990) thatinvolvesmultiplechannels,suchas field
in termsof productattributes. Such tools mayalso reveal sales forces,Internet, directmail, businesspartners, and
substantial marketsegments withserviceneedsthatare not telephony. There are a growing number of channels by
fullycateredto by the attributes ofexistingoffers. whicha companycan interact withitscustomers. Through
an iterativeprocess, we categorizedthe many channel
The Value the Organization Receives and Lifetime optionsintosix categoriesbroadlybased on thebalanceof
Value physicalor virtualcontact(see Figure2). Theseinclude(1)
sales force,includingfieldaccountmanagement, service,
Fromthisperspective, customer valueis theoutcomeofthe
of the ofimproved
and personalrepresentation; (2) outlets,includingretail
coproduction value, deployment acquisi- includ-
tion and retention and the of effective
utilization branches,stores,depots,and kiosks;(3) telephony,
strategies, traditional telex, and call center
Fundamental to thisconceptof cus- ing telephone, facsimile,
channelmanagement.
tomervalue are two key elementsthatrequirefurther contact;(4) directmarketing, includingdirectmail,radio,
and traditionaltelevision(butexcludinge-commerce);(5)
research.First,itis necessaryto determinehowexisting and
e-commerce, includinge-mail,theInternet, and interactive
potential customer varies
profitability acrossdifferentcus-
tomersand customersegments.Second,theeconomicsof digitaltelevision;and (6) m-commerce, includingmobile
telephony,short message serviceand textmessaging, wire-
customer acquisitionandcustomer retentionandopportuni-
less applicationprotocol,and 3G mobile services.Some
ties for cross-selling,up-selling,and buildingcustomer to maximize
channelsare now beingused in combination
advocacymustbe understood.How theseelementscon-
tributeto increasingcustomerlifetimevalue is integralto
commercial exposure and for
return; example,thereis col-
valuecreation.
laborativebrowsing and Internetrelaychat,usedbycompa-
nies suchas Lands End, and voice overIP (Internet proto-
Customerretention representsa significantpartof the which both and the Internet.
researchon value creation.For example, Reichheld and col), integrates telephony
Sasser(1990) identify thenetpresent value improve-
profit
mentof retaining customers, and Rustand Zahorik(1993) Integrated Channel Management
and Rust,Zahorik,and Keiningham(1995) outlineproce- Managingintegrated channelsrelieson theabilityto uphold
duresforassessingthe impactof satisfaction and quality thesamehighstandards different
acrossmultiple, channels.
efforts on customer retention and market Having a
established set of for
standards each channel that
improvement
share.More recently, researchhas emphasizedcustomer definesan outstanding customerexperienceforthatchan-
and Deighton1996; Hogan,Lemon, nel, theorganization can thenworkto integrate thechan-
equity(e.g., Blattberg
andRust2002; Rust,Lemon,andZeithaml2004). Calculat- nels. The conceptof the "perfectcustomerexperience,"
ing the customerlifetimevalue of different segments whichmustbe affordable forthecompanyin thecontextof
enablesorganizations to focuson themostprofitable cus- thesegmentsin whichit operatesand its competition, is a

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 newconcept.Thisconceptis nowbeingembraced
relatively analysis,creditscoring,and cus-
campaignmanagement
in industry by companiessuch as TNT, Toyota'sLexus, tomerprofiling.
Oce, and Guinness Breweries,butithas yettoreceivemuch
in theacademicliterature.
attention multichannel
Therefore, Front Officeand Back OfficeApplications
integration is a critical
processin CRM because it repre- Frontofficeapplicationsare the technologiesa company
sentsthepointof cocreationof customer value.However,a uses to supportall thoseactivitiesthatinvolvedirectinter-
company'sabilityto executemultichannel suc-
integration facewithcustomers, includingSFA andcall centermanage-
is
cessfully heavilydependent on theorganization's
ability ment.Back officeapplicationssupportinternal administra-
to gatherand deploycustomerinformation fromall chan- tionactivitiesand supplierrelationships,
nelsandto integrate itwithotherrelevant
information. includinghuman
resources,procurement, warehouse management, logistics
software,and some financialprocesses.A key concern
Information
ManagementProcess aboutthe frontand back officesystemsofferedby CRM
vendorsis thattheyaresufficientlyconnected andcocoordi-
The information management processis concernedwiththe natedto improvecustomer and workflow.
collection,collation,anduse ofcustomer dataandinforma- relationships
tionfromall customercontactpointsto generatecustomer
CRM Technology MarketParticipants
insightandappropriate marketingresponses.The keymate-
rial elementsof the information management processare Gartnersegmentsvendorsof CRM applicationsand CRM
thedatarepository, whichprovidesa corporate memoryof serviceprovidersinto specificcategories(Radcliffeand
IT
customers; systems, which include the organization's Kirkby2002), and Greenberg (2001) and Jacobsen(1999)
computerhardware,software,and middleware;analysis provide detailed reviews of CRM vendors'products.The
tools; and frontofficeand back officeapplications, which key segments for CRM applicationsare Integrated CRM
the
support many activities
involvedin interfacing
directly and Enterprise ResourcePlanningSuite(e.g., Oracle,Peo-
withcustomers and managinginternal operations,adminis- pleSoft,SAP), CRM Suite(e.g., Epiphany,Siebel), CRM
tration,andsupplierrelationships(Greenberg 2001). Framework(e.g., Chordiant),CRM Best of Breed (e.g.,
NCR Teradata;Broadvision),and "Build itYourself'(e.g.,
Data Repository IBM, Oracle,Sun).The CRM serviceproviders andconsul-
The datarepository tantsthatoffer implementation support specializein thefol-
providesa powerful corporatememory
of customers,an integratedenterprisewidedatastorethatis lowingareas: corporatestrategy(e.g., McKinsey,Bain);
CRM strategy(e.g., Peppers& Rogers,Vectia); change
capableof relevantdataanalyses.In largerorganizations,
it
maycomprisea datawarehouse(Agosta1999; Swift2000) management, organization design, training, human
and relateddata martsand databases.Thereare twoforms resources, and so forth(e.g.,Accenture);businesstransfor-
ofdatawarehouse, theconventional datawarehouseandthe mation(e.g., IBM); infrastructure buildingand systems
operationaldatastore.The latterstoresonlytheinformation integration (e.g., Siemens,Unisys);infrastructure outsourc-
necessaryto providea singleidentityforall customers.
An ing (e.g., EDS, CSC); businessinsight,research,and so
data modelis used to managethisdata conver- forth(e.g., SAS); and businessprocessoutsourcing (e.g.,
enterprise
sion processto minimizedata duplicationand to resolve Acxiom).The needforcomprehensive and scalableoptions
has createdscope formanynew productsfromCRM ven-
anyinconsistenciesbetweendatabases.
dors.However,despitetheirclaim to be "completeCRM
IT Systems solutionproviders," fewsoftware vendorscan providethe
fullrangeof functionality thata completeCRM business
Information technology systemsreferto thecomputer hard-
strategyrequires.
wareand therelatedsoftware and middleware used in the The information management processprovidesa means
organization.Often,technologyintegrationis required ofsharingrelevant customer andotherinformation
beforedatabasescan be integrated intoa data warehouse through-
out the enterprise and "replicating the mindof the cus-
and useraccess can be providedacrossthecompany.How- tomer."To ensurethattechnology solutionssupportCRM,
ever,the historicalseparationbetweenmarketing and IT itis important to conductIT planningfroma perspective of
sometimes issues at theorganizational
presentsintegration providing a seamlesscustomer serviceratherthanplanning
level (Glazer 1997). The organization's capacityto scale forfunctional or product-centered departments and activi-
existingsystemsor to plan forthemigration to largersys- ties.Furthermore, data analysistoolsshouldmeasurebusi-
temswithout disruptingbusiness is
operations critical. ness activities.This kindof analysisprovidesthebasis for
theperformance assessment process.
Analytical Tools
The analyticaltools thatenable effective
use of the data
warehousecan be foundin generaldata-mining packages Performance
AssessmentProcess
and in specificsoftware
applicationpackages.Data mining The performance assessmentprocesscoversthe essential
enablestheanalysisof largequantitiesof data to discover task of ensuringthatthe organization's strategicaims in
meaningful patternsand relationships
(e.g., Groth2000; termsof CRM are beingdeliveredto an appropriate and
Peacock 1998). More specificsoftwareapplicationpack- acceptable standardand thata basis forfuture
improvement
ages includeanalyticaltools thatfocus on such tasks as is established.This processcan be viewedas havingtwo

A Strategic
Framework
forCRM1173

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main components:shareholderresults,whichprovidea thepotential problemsassociatedwitha narrowtechnologi-
macroview of the overallrelationships
thatdriveperfor- cal definition of CRM and realize strategicbenefits.Our
mance, and performance monitoring, whichprovidesa researchwas based on largeindustrial companiesbecause
moredetailed,microviewof metricsand keyperformance thesize and complexity of suchenterprises is likelyto pre-
indicators. sent the greatestCRM challenges.We did not examine
issues relatedto small or medium-sizedcompaniesand
Shareholder Results in thiswork.
nonprofit organizations
To achievetheultimateobjectiveof CRM, thedeliveryof Thisstudycontributes to themarketing literaturein sev-
shareholder results,theorganization shouldconsiderhowto eralways.First,ourworkextendsa managerialperspective
build employeevalue, customervalue, and shareholder thatstressestheimportance ofcross-functional processesin
valueandhowto reducecosts.Recentresearchon relation- CRM strategyand contributes to the positioningof the
shipsamongemployees,customers, and shareholders has poorlydefinedCRM conceptwithinthe marketing litera-
emphasized the need to adopt a more informed and inte- ture.Second,itprovidesa process-based conceptual frame-
gratedapproachto exploiting thelinkagesamongthem.The workforstrategic CRM and identifies keyelementswithin
serviceprofitchainmodeland relatedresearchfocuseson each process.Third,it makesa contribution to thelimited
establishing therelationshipsamongemployeesatisfaction, literatureon interactionresearch.Finally,theresearchrep-
customerloyalty, and shareholder
profitability, value (e.g., resentsa grounded contribution thatoffers managersinsight
Heskettet al. 1994; Loveman 1998). Organizations also intothedevelopment and implementation of CRM strate-
needtofocuson costreduction Two
opportunities. means of gies. To date,this framework has been used by companies
costreduction are especiallyrelevantto CRM: deployment to addressseveralissues,includingsurfacing problematic
of technologies rangingfromautomated telephonyservices CRM issues,planningthekeycomponents of a CRM strat-
toWebservicesandtheuse ofnewelectronic channelssuch egy,identifying whichprocesscomponents of CRM should
as online,self-servicefacilities.
The development ofmodels receivepriority,creatinga platform forchange,and bench-
such as the serviceprofitchain has been important in marking othercompanies'CRM activities.
enablingcompanies to considerthe effectiveness
of CRM at Muchresearchremainsto be donein theexploration of
a strategiclevelin termsofimproving shareholderresults. themultifaceted natureofCRM. Sheth(1996) notesthatfor
an emerging management discipline,itis important to have
Performance Monitoring an acceptabledefinition thatencompassesall facetsto focus
Despitea growingcall forcompaniesto be morecustomer understanding and growthof knowledgein thediscipline.
oriented,thereis concernthat,in general,themetricsused He proposesa multistage processforachievingthisthat
by companiesto measureand monitortheirCRM perfor- beginswithdelimiting thedomain,agreeingon a definition,
mance are not well developed or well communicated. developing performance measures, anddevelopingexplana-
Ambler's(2002) researchfindings raiseparticular concern., torytheory. The framework we proposein thisarticleoffers
he findsthatkeyaspectsof CRM, suchas customersatis- a potentially usefulstarting pointforthe development of
factionandcustomer onlyreachtheboardin 36%
retention, improvedinsight into these aspectsof CRM theory.The
and51% ofcompanies,respectively. Even whenthesemet- taskof delimiting thedomain,agreeingon a definition for
ricsreachtheboardlevel,itis notclearhowdeeplytheyare CRM, and building a research agenda will be an evolving
understood and how muchtimeis spenton them.Tradi- processinthisnascentarea.We do notattempt tobuildsuch
tionalperformance measurement systems, whichtendto be a researchagendain thecurrent work;however, we empha-
functionallydriven,may be inappropriatefor cross- size the importance of CRM implementation and related
functionalCRM. people issues as an area in which furtherresearchis
Recent effortsto providecross-functional measures, urgentlyneeded. Initial work by Ebner and colleagues
suchas thebalancedscorecard(Kaplan and Norton1996), (2002), Gummesson(2002b, c), Henneberg(2003), Pettit
are a usefuladvance.The format of thebalancedscorecard (2002), andRigby,Reichheld, andSchefter (2002) provides
enablesa widerangeofmetricsdesigns.Indicators thatcan a usefulplatformfromwhichto develop this important
revealfuturefinancialresults,not just historicalresults, researcharea.
need to be consideredas partof thisprocess.Standards,
metrics,and key performance indicatorsforCRM should Appendix
reflecttheperformance standards necessaryacrossthefive Some Definitions
and Descriptions
majorprocesses to ensure
and practicedeffectively
thatCRM activitiesare planned
and thata feedbackloop existsto
ofCRM
.CRMis ane-commerce (Khanna
application 2001).
maximizeperformance improvement and organizational
.CRM is a termformethodologies, technologies,and e-
learning.A considerationof "returnon relationships" commerce capabilities by companies managecus-
used to
(Gummesson 2004) willassistin identifying further metrics tomer (StoneandWoodcock 2001).
relationships
thatarerelevant to theenterprise. thatbelongsinall areas
initiative
.CRM is anenterprisewide
(SinghandAgrawal
ofanorganization 2003).
andprocessofacquiring,
Discussion .CRM is a comprehensive
andpartnering
retaining,
strategy
withselectivecustomers to create
In thisarticle,we developa cross-functional,
process-based valueforthecompany
superior andthecustomer (Parvitiyar
CRM strategy framework thataimstohelpcompaniesavoid andSheth2001).

October2005
ofMarketing,
1741Journal

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All use subject to JSTOR Terms and Conditions
 .CRM is aboutthedevelopment and maintenance of long- .CRM involvesusingexistingcustomerinformation to
term,mutuallybeneficial withstrategically
relationships sig- improve company andcustomer
profitability service
(Could-
nificantcustomers 2001).
(Buttle well1999).
.CRM includes numerous aspects,butthebasictheme is for .CRMattempts toprovide
a strategic
bridgebetweeninforma-
thecompany tobecomemorecustomer-centric. Methods are tiontechnology andmarketing aimedat building
strategies
primarilyWeb-basedtoolsandInternet
presence (Gosney and long-term and profitability.
relationships This requires
Boehm2000). "information-intensive (Glazer1997).
strategies"
.CRMcanbe viewedas anapplication ofone-to-one market- .CRMis data-driven marketing(KutnerandCripps1997).
ingandrelationshipmarketing,respondingto an individual .CRM is an enterprise to
approach understanding andinflu-
customer on thebasisofwhatthecustomer saysandwhat encingcustomer behaviorthrough meaningfulcommunica-
elseis knownaboutthatcustomer Rogers,
(Peppers, andDorf tionto improve customer customer
acquisition, retention,
1999). customer andcustomer
loyalty, (Swift
profitability 2000).
.CRMis a management approachthatenablesorganizations
to
identify, and increaseretention
attract, of profitablecus-
tomers bymanaging withthem
relationships (Hobby1999).

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