Customer Relationship Management: Concepts and Tools

Citation

Landrigan, M. (2005), "Customer Relationship Management: Concepts and Tools", Journal of Consumer Marketing, Vol. 22 No. 4, pp. 237-238. https://doi.org/10.1108/07363760510605380

Customer relationship management (CRM) is the latest management trend intriguing the corporate world. This book is a balanced, well‐researched and engaging treatise on the subject.

The book begins with an acknowledgment that “customer relationship management, or CRM, means different things to different people” (p. 3). The author, however, does a magnificent job of gathering the different perspectives, categorizing them, and presenting a comprehensive overview.

The first chapter, appropriately titled “Making sense of customer relationship management”, presents three ways to think about CRM: strategic, operational and analytical. The author also offers a number of “misunderstandings” about CRM. In his view, CRM is not database marketing, a marketing process, an IT issue, or loyalty schemes. It is also not something that can be implemented by just any company. He follows these assertions with a balanced and thorough discussion of the issues surrounding CRM. The chapter subheadings give some idea of just how through:

• •

  What is a relationship?

• •

  Why companies want relationships with customers.

• •

  Customer satisfaction, loyalty and business performance.

• •

  But do customers want relationships with companies?

• •

  CRM constituencies.

• •

  Why do companies implement CRM?

• •

  Contexts of CRM.

By the end of Chapter 1, we have a useful and comprehensive CRM definition:

CRM is the core business strategy that integrates internal processes and functions, and external networks, to create and deliver value to targeted customers at a profit. It is grounded on high‐quality customer data and enabled by IT (p. 34).

Chapter 2 presents a model that takes this definition as a point of departure – the “CRM Value Chain” (p. 39). The model's components comprise the bulk of the remainder of the text. Each stage in the chain warrants its own chapter. The stages are:

1. 1.

   customer portfolio analysis;

2. 2.

   customer intimacy;

3. 3.

   network development;

4. 4.

   value proposition development; and

5. 5.

   manage the customer lifecycle.

In addition, the author adds “supporting conditions” to the model and defines them as “leadership and culture, data and information technology (IT), people, and processes” (p. 42). Buttle briefly treats each of these supporting conditions in this chapter, but focuses on them in more detail later.

The author highlights the importance of supporting information technology by devoting Chapter 3 to this subject, and by having a CRM practitioner write it. John Turnbull provides an accessible overview of CRM architecture and applications. The details are not beyond the grasp of non‐techies.

Buttle is back for the next and ensuing chapters. Customer portfolio analysis, the topic of Chapter 4, is presented with enough details to create a solid blueprint for both performing market segmentation and analyzing the resultant data. He also includes sales forecasting techniques and lifetime value models. As the author states, “The purpose of all this analysis is to disaggregate potential and current customers into subsets so that different value propositions and relationship management strategies can be developed for each group” (p.134). The reader will be well prepared to take on this challenge.

Database management is at the core of Chapter 5, which is titled “Customer intimacy”. Here we are offered specifics on setting up a customer database including information requirements, information fields, data attributes, sources of information, data enhancements and technologies. There are also plenty of details regarding populating, maintaining and integrating a CRM database.

Because no company operates in a vacuum, the basic claim of Chapter 6 (“Creating and managing networks”) is that “the achievement of CRM objectives requires companies to develop and manage a business network comprising suppliers, partners, investors and employees” (p. 171). Buttle describes several types of networks and identifies several trends, such as vendor reduction programs, category management, new product development alliances and e‐commerce; and, how each can successfully impact CRM strategies. His listing of all the relevant partners in the CRM process includes a discussion of their context and degree of impact, along with suggestions to “help manage the business network so that it helps you to create and deliver value to your selected customers” (p.221).

“What do customers mean when they talk about value? What are the various elements that make up the value proposition? What is the role of ‘experience’ in creating value for customers?” (p. 228). Chapter 7 first examines the concept of value from these perspectives. Buttle opines that the classic marketing mix of the 4Ps (product, price, promotion and place) are the primary sources of customer value. He adds three more Ps (people, physical evidence and process) as value sources for service providers. “Management can create additional value by their management of the 7P's” (p. 264). He illustrates this premise with many detailed examples such as product innovation, branding, product‐service bundling, service quality improvement programs, guarantees and customer communication strategies. The emerging issue of managing the customer experience is also examined. This chapter is a very useful mini‐marketing/advertising course that can serve as a review for readers long away from undergraduate or MBA days, or as an introduction for those from non‐business disciplines.

Two phases of the customer lifecycle are addressed in Chapters 8 and 9. First, we learn about how to acquire customers and then how to retain and development them. Tools and techniques for acquiring customers are presented along with how‐tos on estimating customer value. His basic value estimation model consists of a computation of “gross margins, multiplied by the share of customer spending, multiplied by the probability of winning customer business” (p.274). We are also given key performance indicators for customer acquisition programs.

The author tells us, “Many companies, perhaps as many as nine out of ten, have no customer retention plan in place” (p.298). He discusses the definition of customer retention, the economics of retention, and many strategies for customer retention. He introduces the novel concept of firing (or “sacking”, as Buttle would say) unprofitable customers, and outlines some strategies for accomplishing the deed.

The final chapter aims to help us “learn how companies organize their customer interface to achieve their CRM objectives” (p. 331). Here, we have many organizational structures to consider as Buttle continues his balanced exploration of all of the issues surrounding CRM.

This is an easy‐to‐use textbook with a pleasant and engaging format. Each chapter begins with a list of “Chapter Objectives” that tells readers just what they will understand by the end of the chapter. There is also a “Summary” at the end of each chapter that neatly ties up the important concepts. The author places a list of “References” at the end of each chapter, making for a particularly accessible indexing system. The appropriate body of research immediately follows the material. Throughout the book, the author includes illustrative mini‐cases that put some flesh onto the bare bones of a particular CRM term or concept. The cases are quick and interesting anecdotes. There are also many visuals (charts and diagrams) to enhance the subject matter. In addition, the book has wide margins that invite reader notations, and the author provides grey “highlighting” for important definitions.

I would recommend this text for business students at either the undergraduate or graduate level; and, for non‐CRM practitioners who want an easy‐to‐grasp overview of a complex subject. There is enough information here for a businessperson to sell the idea of CRM internally, hire CRM consultants and work intelligently with them.